7 Reasons Why SCM and Logistics Are Essential for Business Success

Supply chain management (SCM) and logistics are two related but distinct fields that involve the coordination of goods and services from the point of origin to the point of consumption. SCM covers the entire lifecycle of a product, from sourcing raw materials to delivering finished goods to customers. Logistics focuses on the movement and storage of goods within the supply chain, including activities such as packaging, shipping, warehousing and reverse logistics.

Key Takeaways

Supply chain management (SCM) covers the entire lifecycle of a product or service from the point of origin to the point of consumption

Logistics focuses on the movement and storage of goods within the supply chain

Both SCM and logistics are essential for business success, as they can affect the quality, cost, speed and customer satisfaction of products and services

SCM and logistics can improve operational efficiency, customer service, innovation, risk mitigation, sustainability and reputation

SCM and logistics can create competitive advantage by delivering value to customers, suppliers, partners and stakeholders

Both SCM and logistics are crucial for business success, as they can affect the quality, cost, speed and customer satisfaction of products and services. Here are seven reasons why SCM and logistics are essential for any business:

1. SCM and logistics can improve operational efficiency.

By optimizing the flow of goods and resources, SCM and logistics can reduce waste, inventory costs, production delays and transportation expenses. SCM and logistics can also help businesses leverage economies of scale, automation, outsourcing and collaboration to achieve higher productivity and profitability.

2. SCM and logistics can enhance customer service.

By delivering products on time, in good condition and at competitive prices, SCM and logistics can increase customer satisfaction and loyalty. SCM and logistics can also enable businesses to offer customized features, such as tracking, returns, exchanges and warranties, to meet customer expectations and preferences.

3. SCM and logistics can foster innovation.

By facilitating the exchange of information, ideas and feedback among suppliers, manufacturers, distributors and customers, SCM and logistics can stimulate creativity and innovation. SCM and logistics can also help businesses adapt to changing market demands, customer needs and technological trends.

4. SCM and logistics can mitigate risks.

By identifying potential threats, such as natural disasters, supplier disruptions, demand fluctuations and quality issues, SCM and logistics can help businesses plan ahead and implement contingency measures. SCM and logistics can also help businesses diversify their sources, routes and modes of transportation to avoid dependence on a single supplier or carrier.

5. SCM and logistics can support sustainability.

By minimizing the environmental impact of their operations, such as reducing emissions, energy consumption, waste generation and resource depletion, SCM and logistics can help businesses comply with environmental regulations and standards. SCM and logistics can also help businesses adopt green practices, such as recycling, reusing, repairing and remanufacturing products.

6. SCM and logistics can enhance reputation.

By delivering high-quality products and services that meet or exceed customer expectations, SCM and logistics can help businesses build a positive image and reputation in the market. SCM and logistics can also help businesses demonstrate their social responsibility by supporting ethical sourcing, fair trade, human rights and community development.

7. SCM and logistics can create competitive advantage.

By improving operational efficiency, customer service, innovation, risk mitigation, sustainability and reputation, SCM and logistics can help businesses gain an edge over their competitors. SCM and logistics can also help businesses create value for their customers, suppliers, partners and stakeholders.

Tips

Use data analysis tools to monitor your supply chain performance

Communicate effectively with your suppliers, partners and customers

Implement quality control measures to ensure product standards

Adopt agile methods to respond quickly to market changes

Seek continuous improvement opportunities to optimize your processes

Global Demand Trends

According to Statista, the global supply chain management (SCM) market was worth roughly 16 billion U.S. dollars in 2020 and is expected to reach almost 31 billion U.S. dollars by 2026. This indicates a strong and growing demand for SCM services and solutions across different regions and industries. The expansion of international trade, the emergence of new technologies, and the increasing awareness of environmental and social issues are some of the factors that drive this demand.

Regional Demand Patterns

The demand for SCM and logistics varies by region, depending on the level of economic development, trade openness, infrastructure quality, and consumer preferences. According to KPMG, some of the key regions to watch in 2023 are:

Asia-Pacific:

The region is expected to remain the largest and fastest-growing market for SCM and logistics, as it hosts some of the world’s largest manufacturing hubs, such as China, India, and Vietnam. The region also benefits from the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among 15 countries that covers about 30% of the global GDP and population.

Europe:

The region is facing some challenges in SCM and logistics, such as Brexit, the COVID-19 pandemic, and the rising costs of labor and energy. However, the region also offers some opportunities, such as the European Green Deal, a set of policies that aim to make Europe the first climate-neutral continent by 2050, and the Digital Single Market, a strategy that aims to create a seamless online market for goods and services across the EU.

North America:

The region is undergoing some changes in SCM and logistics, such as the United States-Mexico-Canada Agreement (USMCA), a trade deal that replaces the North American Free Trade Agreement (NAFTA), and the Biden administration’s infrastructure plan, which proposes to invest $1.2 trillion in roads, bridges, ports, airports, broadband, and clean energy. The region also faces some risks, such as the ongoing trade tensions with China and the cybersecurity threats to critical supply chain networks.

Industry Demand Segments

The demand for SCM and logistics also differs by industry, depending on the nature of the products or services, the degree of competition, and the customer expectations. According to G2, some of the industries that are expected to have high demand for SCM and logistics in 2023 are:

E-commerce: The e-commerce industry is booming due to the shift in consumer behavior caused by the COVID-19 pandemic and the advancement of digital technologies. The industry requires efficient and reliable SCM and logistics solutions to deliver goods to customers quickly, cheaply, and safely.

Healthcare: The healthcare industry is facing unprecedented challenges due to the COVID-19 pandemic and the aging population. The industry needs effective and resilient SCM and logistics solutions to ensure the availability and quality of medical supplies, equipment, and vaccines.

Manufacturing: The manufacturing industry is undergoing a transformation due to the adoption of Industry 4.0 technologies, such as artificial intelligence, robotics, internet of things, and cloud computing. The industry demands innovative and agile SCM and logistics solutions to optimize production processes, reduce costs, improve quality, and enhance customer satisfaction.

Frequently Asked Questions

Q: What is the difference between supply chain management (SCM) and logistics?
A: Supply chain management (SCM) covers the entire lifecycle of a product or service from the point of origin to the point of consumption. Logistics focuses on the movement and storage of goods within the supply chain.

Q: What are some examples of supply chain management (SCM) activities?
A: Some examples of supply chain management (SCM) activities are sourcing raw materials, manufacturing products, distributing goods to retailers or customers, and managing returns or exchanges.

Q: What are some examples of logistics activities?
A: Some examples of logistics activities are packaging products, shipping goods by air, land or sea, warehousing inventory, and reverse logistics.

Q: What are some benefits of supply chain management (SCM) for businesses?
A: Some benefits of supply chain management (SCM) for businesses are improving operational efficiency, enhancing customer service, fostering innovation, mitigating risks, supporting sustainability, and enhancing reputation.

Q: What are some benefits of logistics for businesses?
A: Some benefits of logistics for businesses are reducing transportation costs, increasing delivery speed, ensuring product quality, offering customized features, and creating competitive advantage.

References:

https://togarsim.tripod.com/power/cox.pdf

https://www.rieti.go.jp/jp/publications/dp/15e034.pdf

https://openaccess.city.ac.uk/id/eprint/23275/1/Manuscript-BChain-FINAL-25-Nov2019.pdf

https://www.forbes.com/advisor/education/logistics-vs-supply-chain/

https://www.novocargo.com/en/relationship-logistics-and-supply-chain-management/

https://www.investopedia.com/terms/s/scm.asp