Why is Supply Chain Management Important?

Definition of Supply Chain Management
When we go to a Supermarket and pick up a few items like electronics , goods or even clothes and look at the labels, there are many chances that we find them having been manufactured in some other country. In today’s era of growth, Global markets are expanding beyond borders and this has been completely changing the way  demand and supplies are managed with the passing time. Global companies are majorly driven by markets across continents. To keep the cost of manufacturing down, they are forced to keep looking to set up production centers where the cost of raw materials and labor is cheap. Sourcing of raw materials and vendors to supply the right quality, quantity and at right price calls for a planned strategy.

For the above scenario, companies procuring materials globally from various vendors to supply raw materials to their factories situated in different continents. The finished goods out of these different factory locations then pass through various chains of distribution network involving warehouses, exports to different countries or local markets, distributors, retailers and finally to the end customer.

In simple language, managing all of the above activities in tandem to manage demand and supply on a global scale is Supply Chain Management.
“Supply chain management is systematic and strategic coordination management of supplying goods and products required by the end customer.”

Today, more than ever before, supply chain management has become an important 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. When a company has an effective supply chain management in place, they have an immediate competitive advantage over competitors in their industry. This allows businesses to decrease their inherent risks when it comes to buying raw materials and selling products or services.

Better Supply Chain Better Business

Supply chain management has a huge impact on business. Good SCM can directly improve customer service. The right product and the correct quantity must be delivered in a timely manner. Consumers want to be able to know the location they must go to obtain the goods that they want.

Consumers also want a high standard of customer support. If goods are not distributed on time, supply chain management branches of a company have to assure them that they will get their products as soon as possible. SCM also has a huge impact on the bottom line of a company.

But how does this work?

There are certain key elements that rule global supply chain management. Let us have a quick look on some of these core elements of Supply chain management system.

1.Product Movement:
The product movement plays a vital role in designing SCM model. Movement of the product needs to be managed well to achieve success in any business. Timely movement of a product from one unit to another, quick delivery are the key components to completely satisfy customers needs. SCM must help to define the process of product movement.

2. Information Sharing and Communication:
Inappropriate communication can lead to disaster in businesses. SCM model should be designed such that it has an appropriate flow of information movement from one point to another while conducting business.

3. Timely Order to Delivery:
Supply chain management model must meet the deadlines well from the beginning till the end. Organization’s success is solely depending on how successful the delivery of the product is when it reaches the customer’s hands. Right from the order processing to manufacturing, receiving, quality checks and until delivery to the customer, SCM model must be fine tuned appropriately.

4. Service after delivery:
Performance management is another important aspect to be considered to gain long term success. SCM model should have a system to regularly conduct performance reviews, quality checks after delivery so that the service after delivery is well taken care of. The continuous business growth needs to be considered while designing supply chain management system.

5. Finance:
Supply chain management also includes managing finances of the organization. Accounts payable, inventory management, billing accuracy , possibilities of sharing costs across facilities are the few key finance activities that need to be defined well in the SCM model.

Information Technology and SCM

Supply Chain Management is a broad-based function that encompasses all business and operational processes involved in but not limited to Procurement, Manufacturing, and Finished Goods Transportation, warehousing & Distribution and Inventory Management.

Global business has been fueled and enabled by the IT Technology which has redefined all aspects of business today. All businesses today are run on ERP – Enterprise Resource Planning which provides the organizations with tools to manage all the functions including procurement, production, sales, and finance management in seamless and integrated manner.

These software systems have taken over and enhanced the business processes that were traditionally being managed manually.

Finished goods distribution, transportation, and inventory management, besides sales process is again driven by the various ERP modules combined with additional specific applications as required.

These software  has enabled companies to manage their business processes in different markets and countries under one common business process thus providing standardization and control.

Why is Supply Chain Management Important?

1.Improved customer service:
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.

2.Reduce operating cost:
Retailers depend on supply chains to quickly distribute costly products to avoid sitting on expensive inventories.
Any delay in production can cost a company huge loss. This factor makes supply chain management ever more important. Reliable delivery of materials to assembly plants avoids any costly delays in manufacturing. 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.

3.Shipping Options:
Supply chain management systems help companies determine the optimal ways to ship while reducing costs to the lowest possible level.

4.Inventory Buffers: 
Supply chain management systems typically include manage inventory buffer levels that are pre-determined with careful analysis of historical trends.

5.Eliminate Waste:
Business owners across the country are becoming more and more concerned with the amount of waste they produce. They are looking for new ways to reduce or eliminate the amount of waste their company makes on a daily basis. When it comes to supply chain management, there are lean practices that can help you to identify areas of waste improvement.

Conclusion:

A supply chain is more than a simplistic set of links along a linear path from raw material extraction to end consumer use. Integration and synchronization of a supply chain do not occur by happenstance. An organization must make supply chain management a strategic priority, assemble the right talent, build key relationships, and invest in essential technological capabilities.

Regur Technology Solutions can help you develop such Supply chain management systems/ERP systems  and other CRM for your business to successfully manage all your business processes as all are needed to achieve supply chain excellence.

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About the Author

Rashika Raina

Rashika is working as Business Development Executive at Regur technology Solution. She has a zeal to learn & grow and passion for work in any competitive situation. Her interest lies in Sales, Marketing Strategies, International Marketing, Business development. Apart from this, she has a good hold in communication, presentation and Market research skills.