Benefits of Supply Chain Management
Supply Chain Management is the execution and planning activities conducted to achieve customer satisfaction and competitive advantage throughout the end-to-end sequential processes from raw material sourcing to delivering the finished product to the end user. What is Supply Chain Management? What are the benefits of supply chains? Let’s explore the answers to these questions together within this scope.
Key Functions of Supply Chain Management
The concept of supply chain management is based on two fundamental ideas:
- First, almost every product reaching the end user represents the cumulative effort of multiple organizations. These organizations, including suppliers, suppliers of suppliers, our own production and logistics facilities, our customers, and our customers’ customers, are all referred to as a supply chain.
- Secondly, despite the long-standing existence of supply chains, most organizations only focus on what happens within their “four walls.” Finally, few businesses have begun to perceive the entire activity chain delivering the product to the ultimate customer and have started to contemplate its efficient management.
A company’s supply chain management efforts begin with the development and execution of a long-term supply chain strategy. Among other things, what needs to be done includes:
- Segment your customers based on their expectations and performance metrics that will satisfy them.
- Evaluate your existing supply chains according to these segments, you may need multiple and different chains.
- Determine how your supply chains can be more competitive.
- Help relevant managers understand how your operational processes add value to the supply chain.
- Design win-win working methods for supply chain partners, including suppliers, subcontractors, transportation providers, and distributors, to act in line with the defined strategy.
Companies often do not know which supply chains they compete in. In a workshop, every manager we asked had drawn their company’s supply chain differently. Therefore, mapping the physical and information flows that make up the supply chain is invaluable. Companies can begin to understand how they add value from these maps and what information is needed to ensure that the supply chain operates as effectively and efficiently as possible. Of course, any improvements made to the current chain design must be consistent with the company’s supply chain strategy. The objectives of other functions, such as purchasing, logistics, production, and marketing, should be consistent with the identified supply chain strategy.
Benefits of Supply Chain Management
The most important benefits of supply chain management that will make your business more efficient from production or procurement to customer delivery are as follows:
Significant Increase in Efficiency:
When you optimize your business’s supply chain to align with your business strategy, it will not only help you meet current demand but also determine the best action to meet future demand. And this is one of the key benefits of supply chain management.
Increased Output
When you have an effective supply chain management system, you will improve your communication, collaboration, and coordination with suppliers, vendors, transportation companies, and customers, thus increasing the total output of the system. This is the most important benefit of a supply chain management system.
Better Cost Management
One of the most significant benefits of supply chain management systems is being able to see cost resources better, thus achieving better cost management.
Stronger Revenue
When you establish and manage a proper supply chain, your customer service level will increase, making you more competitive. This leads to an increase in market share and sales revenue.
