What is supply chain management?
Supply chain management is the process where the flow of a product or service is delivered from the person who supplies the raw materials to the end customer or the final destination. It can also be related to converting the raw material into its final product. Generally, supply chain management (SCM) includes manufacturing and distribution management, FMCG, E-commerce, Logistics and even ware-housing.
Stages of supply chain management
There are about 5 stages in a supply chain management system; Simply, they are as follows,
- Sourcing the raw materials
Now, let’s get into our discussion on the advantages of effective supply chain management…
- Increased efficiency
- Better interactions with suppliers
- Shipping optimization
- Cutting out overhead costs
- Increasing revenue
- Proper inventory management
- Increased customer satisfaction
- Ability to forecast
- Implementation of risk mitigation plans
- Increased visibility
- Ability to control the quality
11 Advantages of effective supply chain management
A proper supply chain management system entails a heap of benefits to your company or business organization. Let’s consider a few benefits out of the many:
When a proper supply chain management system is implied throughout the business, it will help in increasing the efficiency in all most all aspects of the company or the organization. Increased efficiency in SCM is not just about increasing the efficiency of just one aspect, but also the different criteria such as logistics, procurement and delivery too will be efficient. Moreover, a proper supply chain management process will allow you to avoid delays in the manufacturing process and shipping processors, which could otherwise incur losses to the business or the organization.
Better interactions with suppliers
A supplier is one of the utmost essential individuals or a business that provides certain products or services to another entity; specifically, it can be your business. Therefore, since they could bring profit to your company through their products, it is indeed essential to collaborate better with the suppliers. And having proper supply chain management would bring heaps of benefits when you or your business is involved and interacting with the suppliers. This also implies an excellent long-term relationship with the supplier is always better for the health of your business.
Shipping optimization refers to the process of shipping products to a business in the most cost-effective and time-saving procedure. This usually means moving goods to the appropriate place, but words in relation to this, such as freight, can mean shipping in bulk. Nevertheless, effective supply chain management will lead to better shipping optimization methods which can benefit the business by competing with the uprising prices at present.
Cutting out overhead costs
An adequate supply chain management system will allow you to foresee the flaws and inefficient methods that are used in your business’s manufacturing and supplying criteria. In addition, an effective supply chain management system will check up on the flaws related to security and storage as well. This ability of SCM will allow us to take necessary actions before the business is downgraded and, in turn, helping out to cut off the overhead costs that we might incur later on.
A business only has a short run if it is always on the losing side and has no increasing profits or revenue. Yet, having effective supply chain management can be an ideal way of increasing the revenue of the company or the organization. This is due to its strong management by cutting overhead costs and never lacking products or goods due to carelessness. Moreover, effective SCM will always remember to keep an eye on having consistent quality and stay alert with price hikes in the necessary business field. Hence, this will contribute to the increase in the revenue of the business.
Proper inventory management
Inventory management generally refers to the total amount of goods and products which are on hand. And it is a vital aspect to have when a business is running throughout. If the business has no adequate amount of products or services to supply the needs of customer satisfaction, the company or the organization might fail then and there. Furthermore, it is a must for a business to know at which level of inventory level they stand. This will definitely give an idea of how the products are processed between the different parties following up on the business. Hence, that business will not be out of stock, or a heap of stocks will go unused, and both these aspects, which are contributed by supply chain management aligning with inventory management, will not let you miss out on the perfect sales opportunities or incur heavy losses.
Increased customer satisfaction
Customer satisfaction is vital and, of course, a priority. Having a proper supply chain management system will lead to consistently connecting with the customers and gaining access to respond to the customer needs much more efficiently. With increasing customer satisfaction due to an effective supply chain management system, the business or the organization will be able to gain a higher reputation leading to increasing customers and brand loyalty. An effective SCM system is a must if a business is thinking about gaining customers.
Ability to forecast
Forecasting is an important aspect of a business since the future of the business needs to be having goals and specified tasks in the long run. In this essence, the entity should be able to have a close-up look on the basis of inventory and suppliers along with other different aspects which could be influential to a business. A few other aspects that a business needs to focus on are the economic state of the business, competitors, consumer preferences that might change along with different trends and how the business should be advanced based on future technological aspects. An effective supply chain management system will involve foreseeing, which will help to either solve the issues or implement new techniques in order to solve them.
Implementation of risk mitigation plans
A business is of consistent risks in which all parties involved in the business find solutions to overcome them and proceed for a worthy profitable cause by providing different services or products. Since an effective supply chain management process is stage-wise, the flaws become easily identifiable, promoting the ability to cross over the hurdles and implement risk mitigation plans following up with the business. Risk mitigation plans are vital if the business does have a need to compete with the competitors ahead of time.
When we consider an effective supply chain management system, it is not just manual, but also there are different software for different areas in the field of SCM. These different types of software, which are integrated into a SCM system, will involve providing increased visibility to a business or an organization which helps to be intact with all ongoing processes of the business. Furthermore, the software tools also involve providing better data analytics and real-time data, which is priceless for a business or an organization. The supply chain management software tools involved warehouse management, tracking different distribution channels and showing where the business stands as well. It doesn’t stop from there. Many software tools related to SCM can be integrated with related to how important it might be to the business or the organization.
Ability to control the quality
Another benefit of having effective supply chain management is that since the collaboration with the other parties involved in the business is visible, it will be easier to check up on the quality of the products and the services, which will directly impact on enhancing the customer satisfaction whilst improving the business as well. Moreover, it will also aid in interconnecting the relationship quality between the other parties too, and it’s not just about the quality of the products and services.
Finally, to wrap it up, it’s not only the revenue you are building up but also better relationships with suppliers and other parties in business, therefore sometimes, during supply chain management, if you have to choose between financial aspects and maintaining a good relationship with the other parties or entities, make sure you choose it wisely so that, at the end of the day it is not about you but about the whole business.