7 Reasons Why Supply Chain Management is Essential for Business Success

Supply chain management (SCM) is the process of managing the flow of goods and services to and from a business, including every step involved in turning raw materials and components into final products and getting them to the ultimate customer. Effective SCM can help streamline a company’s activities to eliminate waste, maximize customer value, and gain a competitive advantage in the marketplace.

Key Takeaways

Supply chain management is the process of managing the flow of goods and services to and from a business.

Supply chain management can help streamline a company’s activities to eliminate waste, maximize customer value, and gain a competitive advantage in the marketplace.

Supply chain management involves five main phases: planning, sourcing, production, distribution, and returns.

Supply chain management can benefit a company in terms of cost, quality, speed, reliability, flexibility, innovation, customer satisfaction, sustainability, and social responsibility.

Supply chain management requires various skills and qualifications, such as analytical thinking, problem-solving, decision-making, communication, collaboration, negotiation, leadership, project management, strategic planning, customer service, technical knowledge, and industry expertise.

In this article, we will explore some of the benefits of SCM and how it can improve your business performance.

1. SCM reduces costs and improves efficiency.

By managing the supply chain, companies can cut excess costs and needless steps and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors. SCM also helps to optimize the use of resources, such as labor, equipment, and space, and reduce the risk of overproduction or underproduction.

2. SCM enhances customer satisfaction and loyalty.

By delivering products to the customer on time, in good quality, and at a reasonable price, SCM can increase customer satisfaction and retention. SCM also enables companies to respond quickly to customer feedback and preferences, and tailor their products and services accordingly. Additionally, SCM can help build trust and reputation with customers by ensuring compliance with ethical and environmental standards.

3. SCM fosters innovation and collaboration.

By integrating the activities of different departments and organizations involved in the supply chain, SCM can facilitate communication and information sharing among them. This can lead to better coordination, problem-solving, and decision-making. Moreover, SCM can encourage innovation and creativity by allowing companies to leverage the expertise and capabilities of their supply chain partners.

4. SCM increases flexibility and agility.

By having a clear visibility of the supply chain, companies can anticipate and adapt to changes in demand, supply, or market conditions. SCM can also help companies to cope with uncertainties and disruptions, such as natural disasters, pandemics, or political conflicts, by implementing contingency plans and risk management strategies.

5. SCM supports sustainability and social responsibility.

By implementing SCM practices that minimize the environmental impact of their operations, such as reducing energy consumption, emissions, waste, and packaging, companies can contribute to the preservation of natural resources and the well-being of communities. SCM can also help companies to address social issues, such as human rights, labor standards, health and safety, and diversity and inclusion, by ensuring that their supply chain partners adhere to these principles.

6. SCM creates value for stakeholders.

By improving the efficiency, quality, and profitability of their products and services, companies can create value for their shareholders, employees, customers, suppliers, and society at large. SCM can also help companies to achieve their strategic goals and objectives, such as expanding into new markets, launching new products, or enhancing their brand image.

7. SCM gives a competitive edge.

By implementing SCM effectively, companies can gain a competitive advantage over their rivals in terms of cost, quality, speed, reliability, flexibility, innovation, and customer satisfaction. SCM can also help companies to differentiate themselves from their competitors by offering unique products or services that meet or exceed customer expectations.

Tips

Align your supply chain strategy with your business strategy and customer needs.

Establish clear roles and responsibilities for each supply chain function and partner.

Monitor and measure your supply chain performance using key performance indicators (KPIs).

Continuously evaluate and improve your supply chain processes and practices.

Leverage technology and innovation to optimize your supply chain operations and capabilities.

What is Supply Chain Management and How Does It Affect Global Demand?

Supply chain management (SCM) is the process of managing the flow of goods and services to and from a business, including every step involved in turning raw materials and components into final products and getting them to the ultimate customer. SCM can help streamline a company’s activities to eliminate waste, maximize customer value, and gain a competitive advantage in the marketplace.

The global demand for SCM is influenced by various factors, such as customer expectations, technological innovations, environmental regulations, and geopolitical events. According to a report by Grand View Research, the global SCM market size was valued at USD 15.85 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 11.2% from 2021 to 2028. Some of the key drivers for this growth are:

The increasing adoption of cloud-based SCM solutions that offer scalability, flexibility, and cost-effectiveness.

The rising need for improving operational efficiency, reducing inventory costs, and enhancing customer satisfaction.

The growing demand for e-commerce and omnichannel retailing that require efficient and agile SCM systems.

The emergence of new technologies such as artificial intelligence (AI), blockchain, internet of things (IoT), and big data analytics that enable data-driven decision making and automation in SCM.

The impact of COVID-19 pandemic that has disrupted global supply chains and created new challenges and opportunities for SCM.

Challenges and Opportunities for Supply Chain Management in the Future

As the global demand for SCM increases, so do the challenges and opportunities for businesses that want to leverage SCM as a strategic advantage. Some of the major challenges and opportunities are:

The challenge of managing complex and dynamic supply chains that span across multiple countries, regions, and modes of transportation.

The opportunity of creating more resilient and sustainable supply chains that can cope with disruptions, risks, and uncertainties.

The challenge of meeting the changing customer preferences and expectations that demand faster, cheaper, and more personalized products and services.

The opportunity of enhancing customer loyalty and retention by providing superior customer experience and value-added services.

The challenge of complying with the evolving regulatory and ethical standards that govern environmental, social, and governance (ESG) aspects of SCM.

The opportunity of improving corporate reputation and social responsibility by adopting green SCM practices that minimize environmental impact and promote social welfare.

Supply chain management is a vital function that affects the performance and profitability of any business. By managing the supply chain effectively, businesses can create value for their customers, stakeholders, and society. However, SCM also faces many challenges in the rapidly changing global market. Therefore, businesses need to adopt innovative and adaptive SCM strategies that can help them overcome these challenges and seize the opportunities in the future.

Frequently Asked Questions

What are the main components of supply chain management?

The main components of supply chain management are planning, sourcing
production, distribution, and returns.

What are some examples of supply chain management software?

Some examples of supply chain management software are SAP, Oracle, IBM Microsoft, Infor, JDA, Epicor, Kinaxis, E2open, and Logility.

What are some of the challenges or risks of supply chain management?

Some of the challenges or risks of supply chain management are demand variability, supplier reliability, quality issues, inventory management, transportation delays, cyberattacks, regulatory compliance, ethical dilemmas, and environmental concerns.

What are some of the trends or best practices in supply chain management?

Some of the trends or best practices in supply chain management are digital transformation, artificial intelligence, blockchain, cloud computing, big data analytics, internet of things, automation, robotics, machine learning, predictive analytics, omnichannel distribution, customer-centricity, circular economy, green logistics, and social responsibility.

What are some of the skills or qualifications required for supply chain management?

Some of the skills or qualifications required for supply chain management are analytical thinking, problem-solving, decision-making, communication, collaboration, negotiation, leadership, project management, strategic planning, customer service, technical knowledge, and industry expertise.

References:

http://fullpaperumtas2012.umt.edu.my/files/2012/07/BE03-ORAL-PP-278-285.pdf

https://web.archive.org/web/20200507140146/https://journals.seagullpublications.com/ijeer/assets/paper/IJ0320191826/f_IJ0320191826.pdf

https://research-api.cbs.dk/ws/files/45061016/andreas_wieland_mapping_the_landscape_postprint.pdf

https://www.investopedia.com/terms/s/scm.asp
https://www.ibm.com/topics/supply-chain-management
https://en.wikipedia.org/wiki/Supply_chain_management