As the world economy begins to recover from the COVID-19 pandemic, there is an imbalance between supply and demand. Consider, for instance, the 80 or so cargo ships awaiting offloading at California ports during the holiday shopping season in mid-November 2021, as reported by Bloomberg. An example of this logjam illustrates the significance of effective supply chain management.
The supply chain management process involves monitoring the movement of goods and services from raw materials to finished products.
The SCM process encompasses a range of business processes, including logistics, purchasing, and IT. This system combines raw materials, money, suppliers, manufacturers, wholesalers, retail stores, and customers into a single operational framework. Keeping the supply chain in good working order ensures that goods and services are available to people.
The Role of a Supply Chain Manager
Supply Chain Managers are responsible for overseeing the entire supply chain of an organization, from the procurement of raw materials to the production of finished goods. In this role, they ensure that the product arrives at the correct location at the appropriate time and that nothing is lost or damaged in the process. Apart from this, they also play an essential role in maintaining and developing positive relationships with their suppliers and distributors.
A bachelor’s degree in business administration gives supply chain managers the basic knowledge and skills to perform these duties. However, an MBA with a concentration in supply chain management enhances an individual’s understanding of supply chains and provides them with a broader range of career opportunities. The best option for graduates interested in pursuing this degree is an online MBA in supply chain since it offers flexibility in scheduling and self-paced learning.
Now that we have a clear understanding of supply chain management and its purpose let’s look at why it is so important for a business.
The Importance of Supply Chain Management
Reduced Costs
It is common for supply chain managers to focus on minimizing costs at every stage of the supply chain. They can do so by maintaining good relationships with suppliers, improving production processes, and keeping track of inventories. Cost reduction throughout the supply chain contributes to increased profitability for the business. Even a slight decrease in the cost of an item can result in significant savings.
Better Collaboration
The flow of information is among the most crucial challenges businesses face today. As reported by Oracle, 76% of companies lack automated information flow throughout their supply chains, and half of these businesses report that information fragmentation contributes to revenue loss. By integrating IT solutions, bottlenecks can be eliminated, and information can be shared seamlessly, providing an overall view of the supply chain. Supply chain leaders have better access to data, which allows them to make more informed decisions and facilitates team collaboration.
Improved Risk Mitigation
By analyzing supply chain data at both a macro and micro level, companies can help companies to identify potential risks that may arise. This will enable them to devise backup plans to deal with unforeseen events. Companies can minimize the adverse effects of disruptions in the supply chain, quality control problems, and other concerns by taking proactive measures rather than reacting to them as they arise. Risk management also assists companies in achieving a lean operating model. 87% of companies believe they could lower their inventory levels by 22% if they knew the risks associated with their supply chains.
Enhanced Customer Experience
Supply chain management is critical to enhancing the customer experience by effectively managing and executing tasks. It aims to provide better customer service by responding in real-time to their needs and delivering products promptly. The importance of prioritizing the customer’s wants cannot be overstated since it helps maintain customer loyalty and enhances the company’s reputation. Furthermore, a network of suppliers and distributors can facilitate the delivery of products and services to consumers with the utmost accuracy.
Quality Control
An efficient supply chain management system ensures a high level of quality control. Monitoring the main tasks, including ensuring on-time delivery, quality assessments of suppliers, and compliance, is one of its key responsibilities. With SCM, businesses can adhere to government guidelines and standards to detect and resolve quality control issues.
Improved Agility
Supply chain management is vital to an organization’s ability to remain agile and deal with unforeseen issues or variability. By simplifying the supply chain process and improving visibility, businesses can identify problems more quickly and address them appropriately. Furthermore, suppose you have contingency plans and what-if scenarios for your production schedule. In that case, you can quickly assess your options and determine which solution will be most beneficial for your company.
Improved Financial Position
Efficient supply chain management has a direct impact on the cash flow and fixed assets of the company. A well-designed warehouse layout and the implementation of appropriate automation solutions are crucial to maximizing the efficiency of a company’s fixed assets, including production facilities, storage units, and vehicles. Moreover, SCM uses the most appropriate accounting methods to identify liabilities and unprofitable areas of a business. A decision can then be made as to whether such parts should be improved or amputated. Therefore, SCM contributes to improving the overall financial position of a company.
Effective Inventory Management
Overstocking controls are an effective way to reduce waste in supply chains. On the other hand, having too much stock results in the accumulation of excess materials, whereas having too little stock results in a failure to satisfy demand, which results in a loss of revenue and profits. SCM enables your business to maintain an adequate inventory control and warehouse management system. This allows you to minimize the cost of holding excess inventory.
Shipping Optimization
As shipping costs continue to rise, organizations focus on optimizing their shipping processes. A company can minimize expenses by determining the most efficient method of shipping small packages, large bulk orders, and other types of orders. These cost savings contribute not only to a company’s bottom line but also to its customers’ satisfaction.
Conclusion
Nowadays, businesses depend heavily on a well-defined supply chain strategy. SCM allows organizations to diagnose problems and disruptions promptly and accurately. In the long run, it is critical since it enables organizations to plan for deviations in advance. It also helps reduce production costs and improve customer service.
Effective supply chain management facilitates the synchronization of workflows by increasing transparency. SCM is crucial to ensuring that items are moved quickly and efficiently to their intended destination. Considering the competitive environment of today’s market, it can help provide a competitive advantage.
