Importance

The Importance of Supply Chain Management

Effective supply chain management (SCM) is the cornerstone of business success. As digital marketplaces and JIT stock control become more prevalent, supply chain solutions must evolve to meet customer expectations. Recent press reports around food supply chain issues have emphasized the essential nature of a solid, well-managed supply chain where managers can predict (and respond to) potential delays or scarcity.

Supply Chain Management Explained

SCM is the practice of monitoring and managing the supply of goods, components, or equipment between producers and the end-user. Many supply chain operations are complex and may include multiple moving parts, logistical challenges, and cross-border communications.

A supply chain manager oversees several functions, such as:

  • The manufacture and procurement of raw materials
  • Handling warehousing capacity
  • Controlling lead times and JIT supplies
  • Forecasting demand
  • Implementing backup procurement strategies
  • Dealing with order processing, dispatch, and fulfillment
  • Managing inventory levels

Because each step in the supply chain can impact the next, SCM requires high levels of efficiency, automation, and reporting, which are best achieved through service management software suitable for the business sector.

The Outcomes of Effective Supply Chain Management

The negative effect of a poorly managed supply chain is perhaps obvious–if a company cannot meet demand, fulfill orders, or operate to capacity, it will inevitably damage customer relationships and revenue. However, a proactive SCM approach can also deliver cumulative benefits.

 

Reducing Operating Costs Through SCM

Inventory held in stock costs money and may be utilizing unnecessary space. A fast, reliable supply chain reduces purchasing spending by ordering only the required units, particularly for higher-value items. Production costs are lower, where manufacturers can depend on their supply chain to deliver parts or materials required for essential projects. A delayed shipment of a critical part can cost thousands of dollars per minute of downtime. 

SCM also lowers supply chain costs by designing networks that meet KPIs and customer service targets at the lowest possible expense. Enhancing SCM efficiency leads to improved competitiveness by reducing the risk of holding obsolete stocks and cutting back on inventory costs.

 

Using SCM to Boost Business Agility

Some sectors move at an extraordinarily fast pace, and agility is key to handling unexpected problems and dealing with variances. Streamlined supply chain functions have better visibility, so managers can identify and diagnose potential issues before they occur or pinpoint the optimal solution quickly. A contingency plan in the case of a sudden delay or what-if scenario planning are useful tools to keep a supply chain operating smoothly.

 

Simplifying Complex Communications

A supply chain can include a large number of manufacturers, suppliers, distributors, and customers, all of whom need to be in the communication loop. Best practice SCM enables real-time information sharing and effective communications, whereby supply chain managers have instant access to order statuses. The data collated through an SCM system is then used for business analytics, measuring performance, and predicting future trends.

Supply chain managers harness those analytics to monitor indicators such as logistics costs. They can then make informed future supply chain decisions based on what has worked perfectly and where disruptions have occurred.

David Blonski

David Blonski

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