Supply Chain Management Explained

Author:  Dr. İlker Guclu  Latest Update:  05 July 2025

Complex logistics systems that transform raw materials into products or services and deliver them to end users are called Supply Chains.

Across supply chains there is a mutual flow of materials and information between suppliers and customers. All managerial activities related to these flows are defined as Supply Chain Management.

The degree of effectiveness with which material and information flows are designed and executed determines success in the supply chain.

Supply chains require making decisions and taking actions that respond to the goals of customers, suppliers and the company. On the other hand, constraints, rules and regulations complicate these decision-making processes and actions.

In today's challenging economic and competitive environment organizations pursue operational and process 'excellence' in their supply chains.

Companies today compete not alone, but together with their supply chains.

For supply chain excellence companies should focus on:

• Create value in operations, eliminate waste and increase service levels
• Develop procurement policies that provide competitive advantage
• Manage production, warehousing and logistics processes with flexibility and coordination
• Develop integrated planning and collaboration to balance demand and supply
• Use digital technologies and AI for data-driven structuring and continuous improvement

With ever-changing competition and market dynamics, organizations should continuously review supply chain operating capabilities and consider restructuring when needed.

What Should Be Considered When Structuring a Supply Chain?

Below are main elements to consider when structuring a supply chain.

The first six follow Chopra & Meindl’s (2016) classic supply chain drivers; later items reflect today's dynamics and requirements.

The performance, risks and benefits of the current supply chain structure should be monitored systematically and, when necessary, restructuring and process improvement activities should be undertaken.

Competitiveness increases when correct decisions are taken consistently and reliably rather than by chance.

Companies should build systems that enable competitive and reliable decision-making in the long, medium and short term.

What Can Be Achieved with Long-Term Planning?

Companies should take strategic decisions that anticipate both today's and future needs to achieve sustainable competitive advantage.

Long-term market, sales and expectation forecasts reduce uncertainty and help make the supply chain more resilient, agile and optimized.

• Investments are directed appropriately: Facility locations, capacity expansions and digitization investments can be planned more effectively.
• Resilience to demand fluctuations: Forecasts enable flexible capacity, inventory and sourcing.
• Supply risks are identified early: Geopolitical or environmental risks can be mitigated with alternative suppliers and scenarios.
• Technology strategy: Define when and how to adopt new technologies to reduce inefficiencies.
• Sustainability alignment: Integrate long-term environmental and social targets into planning.
• Develop organizational capabilities: Invest in skills, training and leadership aligned to long-term HR strategies.
• Optimize cost and profitability: Reduce total supply chain costs while balancing service levels.

What Can Be Achieved with Medium-Term Planning and S&OP?

Medium-term planning typically covers the 3 to 24 month horizon and bridges strategy with operational execution. The most critical process in these planning horizons is Sales and Operations Planning (S&OP/IBP).

S&OP aligns the company's different functions towards a common plan and reduces uncertainties.

• Balances demand and supply: Aligns marketing, sales, production and inventory plans.
• Integrates functions: Sales, production, finance, logistics and purchasing work towards common goals.
• Informs critical decisions: Scenario planning for capacity, new products or market changes.
• Supports financial planning: Updates budget and revenue projections based on S&OP outcomes.
• Optimizes service levels and inventory: Balances customer service targets with inventory costs.
• Guides supplier and production investments: Identifies capacity, outsourcing or new supplier needs.
• Provides strategic visibility to management: Early warning system for performance and risks.

  To learn more about S&OP click here.

What Can Be Achieved with Short-Term Operational Planning?

Short-term management and planning involve weekly and daily decision-making processes.

Operational plans are created, implemented, immediate interventions are made to variable conditions, and operations continuity is ensured at this level.

• Demand planning
  Update short-term forecasts using recent sales, promotions and orders.
    To learn more about demand planning: click here.
• Production planning
  Create detailed production schedules considering capacity, resource availability and materials.
    To learn more about production planning: click here.
• Order and inventory management
  Accept orders, plan delivery dates, manage inventory and promise deliveries based on production and stock.
    To learn more about inventory optimization: click here.
• Materials planning (MRP)
  Convert material needs for production orders into purchase or production orders.
    To learn more about materials planning: click here.
• Detailed scheduling
  Determine minute/hour-level sequences per resource, considering setup, routes and capacities.
    To learn more about detailed scheduling: click here.
• Monitoring and control
  Track execution (production, procurement, shipments) and intervene on deviations.
• Track short-term KPIs
  Monitor efficiency, OEE, delivery performance, downtime and quality on a daily basis.
• Improve agility and rapid decision-making
  Re-plan for off-plan orders, breakdowns or supply issues.

Optimum Planning Services for Supply Chain Management

Optimum Planlama offers consulting and training services for the configuration of Supply Chain Management processes and related tool/software needs.

We recommend customized in-house workshops for teams of companies with complex supply chain processes.

Our Supply Chain Management processes and related service headings are as follows.

To arrange an in-house training for your organization or to join a public session, request our proposal.