Why is the Supply Chain Management Important?

By February 13, 2018Purchase Order Plus
3 crucial things in a supply chain management: time, cost, quality

In the age of Internet, online communications and social media, many of the old rules of doing business no longer apply. Companies, if they want to stay relevant in their industry and grab their piece of the market, need to embrace new business processes, especially when it comes to satisfying their customers. One such process that companies shouldn’t neglect is the supply chain management.

What is the Supply Chain Management?

A supply chain is the system a company uses to get products to customers. It includes everything from obtaining raw materials to delivering the final product into the customer’s hands. As you might have guessed, there is a lot that can go wrong in-between these two steps, which is why it’s important for a business to have a superb supply chain management system.

Why? Because, at the end of the day, customers are only concerned with one thing – getting their product and getting it fast. Speed is essential and is what a good SCM needs to address.

But speed isn’t everything. In fact, try to go to fast and you might crash somewhere else. As such, a supply chain management needs to also ensure that speed doesn’t endanger the quality or the price of the product. This is where maximizing efficiency comes into play in the SCM.

Understanding the Importance of Supply Chain Management

What makes the supply chain management important for companies? A couple of things actually:

  1. A way to one-up competition. Lower price isn’t the only way to get an advantage over your industry competitors. A good supply chain management system can also allow your company to deliver the end product faster to the customers, thus gaining their trust over the competition.
  2. Lower operating costs. Delivering a product to the customer can cause quite a few headaches. This is why companies need to use a good SCM that will help them lower operational costs, from production costs, distribution costs and any other related costs in the supply chain. Each of these in the end adds up to the final cost of the product that the customer will have to pay. In addition, a supply chain management also helps delays in production. Any such delay can be costly and a SCM helps avoid them.
  3. Improves the company’s negotiating position. Companies are often “at the mercy” of suppliers and retailers. But with a good supply chain management, they can greatly improve their position at the bargaining table. After all, what supplier doesn’t like working with an efficient business? Prove that you can deliver your products to consumers on schedule and the suppliers ought to look much more favorably on you.
  4. Overall better customer service. In the end, it all boils down to how happy customers are with your service. A good supply chain management can help a long way with this. Most importantly, they will receive the products they ordered on time and in the quality and quantity that they expect. For example, if you order a pizza and you get the wrong one, with the wrong ingredients and the wrong size, would you be satisfied?
  5. Strengthening the company’s financial position. We already explained how costs can pile up during a supply chain. A good SCM can help control, decrease and even eliminate some of these redundant costs. In addition, if your company has a good supply chain manager, who knows his job, he or she can help you decrease overall costs by ensuring a better and more efficient use of assets such as production plants, warehouses or transportation.

Conclusion

A lot can go wrong between making the product and delivering it to the customer. However, a supply chain management can diminish these dangers and allow your company to satisfy the customer needs.

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