Businesses often ignore the power of Supply Chain Management (SCM), or fail to realize its full potential. A supply chain can not only make a company, but it can break it as well. Most of the e-commerce businesses these days are operating under the pressure of the so-called “Amazon Effect.” Delivering products on time, for a cheaper price has become challenging due to the raising expectations of the customers. This is why today it is even more important to manage supply chains effectively.
What Is Supply Chain Management and Why Is It Important
Before we dig deeper into the importance of SCM, we should understand what SCM is all about, and learn about the process involved.
Supply Chain Management
SCM is the process of which using the movement of services or goods from the provider to the customer can be overseen and controlled. A Supply Chain Manager works towards improving the efficiency of the supply chain, which helps reduce overall costs.
Some of the processes that are overseen by a Supply Chain Manager are:
Raw material procurement
This is the process where the Supply Chain Manager helps source the materials, and oversees the agreements the business makes with the supplier. The Supply Chain Manager also manages the handling of the materials, the transfer of the goods to the site, etc.
Analyzing the location and the size of warehouse or manufacturing site
The Supply Chain Manager considers the volume of the materials or goods the warehouse can process, and its distance from various key sites. These factors help analyze the transportation costs and establish a protocol for moving the goods from one site to another.
The agreements signed between the manufacturers and the suppliers should ensure efficiency and reduce delays, and the Supply Chain Manager takes care of these. The focus is to provide maximum value for the money spent.
Every manufacturer needs to follow a process that helps to collect the inventory, store it and dispatch it. SCM helps in the proper utilization of resources. Storing the inventory for a longer period of time can have an impact on the bottom line.
Changes in the Events
The Supply Chain Manager also takes care of any alternations of events that need to be done on a day-to-day basis. By using a strategic Supply Chain system, businesses can even change the dispatch time for bulk orders. Timely changes can show an impact on the chain, and thus reduce the charges.
Processing of Customer Orders
A supply chain begins with a customer who creates a need when the order is placed, which results in the movement of materials. The process ends with the delivery of the final product. The Supply Chain Manager takes care of the customer’s order, as it is an integral part of the supply chain.
The Supply Chain Manager also takes care of dispatching the order and assists with tracking the orders.
Now that we have a general idea of what SCM is, and what a Supply Chain Manager does, let’s learn about its importance.
The Importance of Supply Chain Management
We now understand that there are various elements which make up a supply chain, and each one of them is independent of the other. SCM ensures smooth operation of the business and it is more than just avoiding a risk. It can do a lot more good than you can imagine.
Improves customer satisfaction and helps with customer retention
An efficient supply chain not only takes care of delays in delivery, but also decreases the risk of customers receiving the wrong products. It ensures that the customers receive the right order on time.
Ensures the availability of products at the right time and right location
Let’s use an example. Imagine a customer’s car battery dying all of a sudden, and the battery is only available in a few weeks. The customer is displeased, as the product is not available when it is needed. At the same time, the garage is unhappy as they have hundreds of batteries which are of no use. SCM ensures that the required products are made available at the right location at the right time.
Reduction of Operational Costs
An efficient supply chain reduces costs throughout the business’ journey. SCM reduces various costs that incur at multiple points during the product delivery to the customer. For example, warehouses can bring in deliveries as and when needed, therefore reducing the need for businesses to hold inventory for long duration. This helps reduce the overall costs and streamlines the supply chain.
SCM not only reduces costs for a business, but also reduces costs for suppliers, which in turn enables renewal of contracts.
Production delays can do a lot of harm to a business and its reputation. For instance, a delay in production can result in an increase of the cost, and dissatisfy the customers.
SCM ensures the timely delivery of goods and materials to the warehouse and lowers any risk of expenses that are caused due to delays or order dispatches.
Increases Your Profits
SCM reduces the dependency on warehouses and also takes care of transportation risks and costs, all of which help reduce the expenditure. This brings in a good cash flow and results in the business being seen in a good light to the customers. SCM results in a speedy delivery of products, and makes the customers happy, increasing the chances of them recommending the products or services to others. All of these things increase profits.
The goal of SCM is to increase the profits of businesses by lowering the overall cost of operations, and improving customer satisfaction. Businesses increase their profit margins when there is an efficient SCM system in place.
- Posted by admin
- On October 7, 2020