The Crucial Role of Supply Chain Management in Business Success
Many U.S. businesses rely on supply chains for the products they sell or manufacture.
A supply chains cover everything from the procurement of raw materials to the distribution of finished products. Supply chain management ensures that each step of the process is carried out as efficiently as possible.
Failure to manage a supply chain correctly can lead to delays and a shortage of products. This can then lead to higher costs and poor business relationships.
An efficient supply chain manager will help to minimize costs and provide a service that keeps customers happy.
Keep reading to learn more about the importance of supply chain management to the success of a business.
The Role of Supply Chain Management in Business
A good business will have the inventory to meet customer demands. It should also offer a competitive price for the products. Both of these are directly affected by the efficiency of a supply chain.
Supply chain management can help businesses in a number of ways. These include:
- Risk management
- Providing contingency plans
- Sourcing suppliers
- Logistics management
- Streamlining manufacturing
- Minimizing warehousing costs
- Improving distribution efficiency
A well-managed supply chain will be able to predict and mitigate potential disruptions and market changes.
Network disruptions can affect the supply to vendors. Having contingency plans in place to avoid devastating knock-on effects is important.
Being able to forecast market trends can help with managing demand. It can also help with inventory management. This will minimize the amount of stock that needs to be stored in warehouses if sales go down.
Good supply chain managers can save businesses a lot of money. They can also ensure relationships between suppliers and manufacturers don’t fracture. This can help with future negotiations, and the resolution of issues.
The Importance of Supply Chain Management
Failure to implement an effective supply chain management system can be catastrophic for businesses.
This is because supply chains rely on multiple collaborations and the efficiency of each relies on the other.
If a delay or disruption occurs, the entire supply chain can be affected. This can lead to delays in manufacturing, increased warehousing costs, and unhappy customers.
A good supply chain management system will make use of the latest technologies and software. This will improve efficiency and visibility.
The use of the latest tech and software will give supply chain managers access to essential data. This data can then be used to measure performance and forecast trends.
Measuring performance can help to identify issues. This allows the supply chain manager to make changes to resolve the issue.
It also helps when creating contingency plans. Contingencies can be useful if disruptions occur. They can be implemented to mitigate the effects and ensure the supply chain keeps in motion.
The Impact of Poor Supply Chain Management
Poor supply chain management will lead to disruptions and delays. Delayed deliveries of supplies or finished products can have a detrimental effect on customer relations.
The end goal of a supply chain should be customer satisfaction. Customer-centric strategies will place a focus on fast deliveries. Failure to live up to promises can result in losing customers because of a damaged reputation.
Decreased efficiency in a supply chain can also lead to other problems. This can include logistics being affected. Logistics management is a key part of the supply chain and relies on everything being ready at agreed times.
Another issue with decreased efficiency is increased costs. This is because workers still need to be paid even when there is little or nothing to do. It can also include storing excess stock in warehouses.
Excess stock can be caused by delayed distribution or less demand for the product. Good supply chain managers will study the market and use detailed analytics and AI to forecast market needs.
It is easy to see why good supply chain management will help a business save money. Likewise, it is easy to see why poor supply chain management will cost a business money.
A good supply chain strategy can have significant benefits for a business. It allows businesses to create a more efficient and cost-effective supply chain. This helps to improve profit margins and customer satisfaction.
Good supply chain management can provide a competitive advantage over competitors. They may be unable to cope with market demand or disruptions as efficiently.
When it comes to famous brands, there aren’t many bigger than Starbucks. However, in 2007/08 the business’s supply chain was failing.
Less than 50% of deliveries arrived on time and the supply chain had outgrown its initial concept. Because the supply chain was never redesigned, it grew to be complex and unfit for purpose.
Third-party logistics costs had also grown with the business and were never reviewed.
Starbucks then laid out its main objectives which were to:
- Reassess and organize the supply chain
- Reduce the cost of their service to customers
- Ensure the new supply chain was suitable for future developments
Starbucks created a new production facility to improve efficiency and distribution opportunities.
They also severed ties with their expensive logistics companies. The remaining logistics companies were then monitored at a higher level.
By 2009/10, Starbucks had made savings of over $500m. A large portion of these savings were attributed to the new supply chain model in place.
Businesses will always look for ways to reduce costs. Implementing a good supply chain management process and ensuring results are monitored can do this.
As well as saving money, it can help to build a company’s reputation and improve customer satisfaction levels.
Supply chains are essential to a wide range of businesses. Because of this, it is equally as essential that the supply chain management process is as efficient as possible.
Supply chain processes are essential to the smooth running of operations. A global supply chain will face the same challenges as a local or national one but on a larger scale.
Ensuring communication and visibility are clear is a great way to keep stakeholders and customers happy. Making use of new technologies will help supply chain professionals do this.
Embracing the latest technologies and software will also help. It will improve data analysis and identify potential issues or disruptions.
Why is supply chain management important to an organization?
The management of supply chain activities will have a significant bearing on the success and profitability of a business.
Failure to implement an efficient supply chain process can lead to delays. This then leads to rising costs and unsatisfied customers.
What is the role of supply chain management in business?
Supply chain management involves the procurement of raw materials required for the manufacturing process. It also covers the transportation and distribution of raw materials and finished products.
Supply chain management is a multi-faceted operation. Everything from logistics to warehousing has to work together to be successful.
How does streamlining supply chain processes save money?
Streamlining supply chain processes helps to minimize unnecessary costs. This could be to do with logistics, procurement, or the manufacturing process. In some cases, supply chain models can be streamlined in a number of ways.