Supply Chain Management is about handling the entire production flow of goods or services, starting from the raw material components to delivering the final product to the consumer. This is all about getting the right product at the right place at the right time. It contains supplier, producer, and customer. The supplier provides the raw materials or services. The producer receives it, produces the product, and sells it through distribution channels to the customer who receives the finished product.
Supply Chain Management is vital for businesses as it increases competitiveness and customer satisfaction by quickly delivering products to the end-user at a low cost.
Companies like Walmart have built their success on superior design planning and operation of Supply Chain Management. They are masters at lowering the cost and moving the product as fast as possible. They have grown because of Supply Chain Management from $1 billion in sales in 1982 to over $408 billion in sales in 2010.
Supply Chain Management represents efforts by suppliers to develop, implement, and maintain supply chains that are efficient and economical. It covers everything from production to transportation and to the information systems needed to direct these undertakings. It is mainly the broad range of activities essential in planning, controlling, and executing a product’s flow from acquiring raw materials required for its production, to distribution to the end consumer, in the most streamlined and cost-effective way possible. There are a lot of benefits of supply chain management that you should know.
Let’s discuss the top 10 of these benefits in this article.
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Planning
Planning is one of the most important benefits of Supply Chain Management. It is about managing and planning the inventory supply to meet the customer demand. It is the component of supply chain management involved with determining how to fulfill best the requirements created by the demand. The main objective is to balance supply and demand to achieve the financial and service goals of an organisation.
Supply planning is the entire process of planning, distribution, manufacturing, and procurement operations that will be needed according to the demand. It requires much more than the planning of individual functions. Optimal planning is only possible with an integrated approach. The internal supply chain consists of four major processes, purchasing, manufacturing, distribution, and sales.
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Higher Efficiency Rate
When a business can incorporate supply chains, integrated logistics, and product innovation strategies, it gets in a great position to fulfill demand. When your business applies supply chain management systems, it will be able to adjust more dynamically to fluctuating economies, emergency markets, and shorter product life cycles.
The main objective of the supply chain is to be able to supply products with predictable demand at the lowest possible cost. Supply chain management provides a higher efficiency rate by giving higher profits through improved customer satisfaction and a lower cost of doing business. It can be achieved by increasing the supply chain visibility, engaging the IT department, and a good project plan.Decrease Cost Effects
Another advantage of supply chain management is the cost decrease in different areas. It improves your inventory system and helps you adjust the storage space by finished goods, eliminating chances of damage. It also enhances your system’s responsiveness to the actual customer’s requirements and improves your relationship with distributors and vendors.
Any saving in the supply chain costs is a step in the right direction. Service improvements that reduce costs – for example, any process improvements that heko you reduce errors and the need for rework will save money for your company and improve the quality of your service provision.
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Increases Output
Another one of the main benefits of supply chain management is communication improvements. This also improves coordination and collaboration with shipping and transport companies by measuring the stock turnover. You can know about your increased output. Stock turnover is the ratio of total sales versus the actual stock or inventory at a point in time.
Comparing planned production versus actual production can also tell you whether your output is increasing or not. Production figures show you whether you are meeting targets weekly, monthly, or annual. Increased output is achieved by good leadership that creates effective communication and procedure standards and makes the workforce empowered.
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Increases Your Business Profit Level
Supply chain management gives you profit which can be seen in the difference between revenues and its costs. This profit is the profit for all the companies involved in the supply chain and it has to be shared across all stages of the supply chain. The success of a supply chain will be defined or measured by total supply chain profitability, not profit at one stage only if you have some inefficiencies at just one stage whether supplier, manufacturer, distributor, retailer or transportation and inefficiency in supply chain that will increase costs may indirectly increase supply chain profitability.
When your business is open to new technologies and improved collaboration within the different departments, you can see that this will also increase your business profit level. Profit can increase by increasing availability by better forecasting of the product. This is one of the benefits of Supply Chain Management that you can increase your profit by reducing waste and using new or better materials.
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Boost Cooperation Level
When we are talking about the most successful businesses, one of the things they all have in common is communication. Lack of communication can result in vendors and distributors having no idea about what’s going on? Hence, this is one of the main advantages of supply chain management. When you open your doors and embrace technology, you can also take advantage of the fact that people don’t need to share the same space to communicate better.
Communication among different business areas helps you have faster access to forecast, quotation, reporting, and statuses, among many other plans in real-time.
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No more delays in the process
Through communication, you can also lower any delay in the processes when everyone is aware of what others are doing. This will prevent any late shipments from vendors, Logistic layers and distribution channels hold up the production lines. On-time delivery refers to complete orders delivered to customers by the deadline.
Delivery mistakes are one of the main reasons behind returned goods and increased costs because you have to send stuff back to suppliers, all of which costs additional money. Delivery is one of the most critical components of supply chain management which builds the integration with the customers and creates a good image of the company. The final products and services that the customers consume should meet their expectations through its delivery channels and logistics services.
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Enhanced Supply Chain Network
Maintaining a sustainable supply chain management system can be quite a riddle to tackle. As per some of its advocates, one of the best ways to do it can be by utilising a combination of lean practices like waste removal. For example, Agile, by combining all the information gathered on the different sectors of your business, allows you to have an enhanced supply chain network.
Companies, on average spend up to 8% of revenues on their distribution and transportation costs—changes in suppliers, business growth, and customer demand all impact the network. Supply chain networks permit us to analyze the big picture giving us a better understanding of the flow of materials and information. It describes the movement of the materials and information by connecting the stages to serve the end customer.
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Post-Delivery Performance
This is also one of the benefits of Supply Chain Management that you can measure your post-delivery performance by measuring R
eturns and Invoice Accuracy. Returns occur if the wrong products were delivered, products were defective or because delivery was late.
Accurate Invoices sent out on time means you get paid on time and when you win. The invoice is full of mistakes that lead to unhappy customers. So, check the percentage of late or incorrect invoices to determine whether you have got problems.
Post-Delivery performance is also known as ‘Reverse Logistics’, which is also one of the essential components of supply chain management. It minimises the potential deterioration of relationships with customers.
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Optimization
Optimisation in the supply chain is the correct deployment of processes and tools that help the optimal operation of a manufacturing and distribution supply chain. While also ensuring the optimal placement of inventory within the supply chain. Minimising operating costs, including manufacturing costs, transportation, and distribution costs.
This also quite often involves the correct application of mathematical modeling techniques using computer software. Supply chain managers are trying to maximise the profitable operation of their manufacturing and distribution supply chain. This could include maximising gross margin, return on inventory invested, and balancing the inventory cost at all points in the supply chain with availability to the customer. Minimising total operating expenses, transportation, inventory, and manufacturing or maximising gross profit of products distributed through the supply chain.
