What is Supply Chain Management??
Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
Benefits of supply chain management
Supply chain management produces benefits such as new efficiencies, higher profits, lower costs and increased collaboration. SCM enables companies to better manage demand, carry the right amount of inventory, deal with disruptions, keep costs to a minimum and meet customer demand in the most effective way possible. These SCM benefits are achieved through choosing effective strategies and appropriate software to manage the growing complexity of today’s supply chains.
Why is Supply Chain Management So Important?
Today, more than ever before, supply chain management has become an integral part of business and is essential to any company’s success and customer satisfaction. Supply chain management has the power to boost customer service, reduce operating costs and improve the financial standing of a company, but how does this work?
IMPROVE CUSTOMER SERVICES
- Customers expect to receive the correct product mix and quantity to be delivered on time. For example, if you buy five books from Amazon and only two of the actual titles arrive, one is an entirely different book and two are missing, the customer will lose faith in Amazon, prompting them to leave a bad review and hinder them from returning to the platform.
- Products need to be on hand in the right location. Customer satisfaction is tarnished if your car’s brake pads fail and the auto repair shop is delayed in making the repairs because parts are not available in-house.
- Follow up support after a sale must be done quickly. When an appliance store sells a furnace with a warranty and it breaks down when temperatures are below freezing, it is a great possibility the customer will be irate if the heating unit cannot be fixed immediately.
REDUCE OPERATING COSTS
- Decreases Purchasing Cost – Retailors depend on supply chains to quickly distribute costly products to avoid sitting on expensive inventories.
- Decrease Production Cost – Any delay in production can cost a company tens of thousands of dollars. This factor makes supply chain management ever more important. Reliable delivery of materials to assembly plants avoids any costly delays in manufacturing.
- Decrease Total Supply Chain Cost – Wholesale manufacturers and retailer suppliers depend on proficient supply chain management to design a network that meets customer service goals. This gives businesses a competitive edge in the marketplace.
IMPROVE FINANCIAL POSITION
- Insert Profit Leverage – Businesses value supply chain managers because they help control and decrease supply chain expenditures.
- Decrease Fixed Assets – Supply chain managers decrease the use of large fixed assets such as plants, warehouses and transportation vehicles, essentially diminishing cost.
- Increases Cash Flow – Firms appreciate the added value supply chain management contributes to the speed of product flows to customers.