Complexities have become a part of life and business. With increasing options, every organisation faces huge challenges to survive in the market today. Managing supply chains is a complex task with the multitude of locations, entities and a hundred of stages involved from creation to distribution of goods and services. However, this also gives rise to the need to implement innovative techniques and ideas to enhance the management of the demand-supply chains. Let’s see how this is the need of the hour and what can be learnt from other businesses on this matter.
What is Supply Chain Management?
Supply Chain Management (SCM) is a huge topic concerning the demand forecast, inventory, logistics, transportation, customer handling and all the links from creating to distributing goods. In other terms, it ranges from procurement of raw resources to final delivery and points of scale. Depending on the type of business, it has various stages, locations and has several entities involved for a time cycle ranging from days to years. Supply chain management, if done right, makes a business prepared for one of the major challenges concerning growth.
A success of an organisation, big or small, is undeniably linked with SCM. Here are some examples and reasons, which if managed well, brings in process transparency, boosts up customer satisfaction and ultimately enhances growth of the organisation.
1.Better Material Inflow:
Material inflows and financial inflows are two major components of supply chain management. A good SCM practice helps better material inflow, which leads to lesser lead time, better flow of inventory, customer satisfaction and better cash flows.
SCM can bring in transparency and clear bottlenecks in information flow. Good communication brings in better success of delivering what is required, when it is required. SCM deals with diverse information such as product data, bills of material, pricing delivery scheduling, delivery status and financial information, etc. Seamless information flow helps save time and avoids duplication of work.
Supply chain management gives a clear picture of where the profit and loss happen. It shows where to invest and where to restrict, to increase turnover. A good SCM in place leads to better cash flows, good inventory turnover, reduction in supply chain costs and reduction in working capital, thus leading to enhanced financials of your company.
4.Better Business Strategies:
A good supply chain strategy is a must for small organisations and supply chain management has it covered. A survey by Deloitte states that 79 % of companies with higher-performing supply chains achieve greater revenue than the average. Here are also examples of organisations that have excelled with their supply chain management practices through clever strategy implementation. The e-commerce giant, Amazon launched Amazon Hub to make its logistics and distribution consistent. Myntra, the popular clothing brand of India, took up one-day delivery and instantly became famous, reaching a new height of supply chain management.
Along with the design strategy of supply chain, the parts dealing with outbound distribution and clients can help or break a business. A good SCM practice will gain confidence of clients with timely submissions and distributions, thus stabilising and increasing your client base.
One of the important factors driving success is customer satisfaction. Businesses such as Dunzo and Swiggy are seeing exponential growth due to this factor. Customers should be the primary focus when determining supply chain strategy, design and performance management. Customer satisfaction is said to be largely dependent on supply chain management and SMEs can see heights of success keeping this in mind.
7.Well-Managed Supply Chain Costs:
A not-so-balanced supply chain will have unreliable demands leading to large production costs and excessive inventory that can stifle cash flows. Research by the Logistics Bureau, which evaluated hundreds of companies, pointed out that over 12% of customers are unprofitable when distribution costs are considered. The methodology of ¡°cost to serve analysis¡± can help to determine various such costs and SCM can help to reduce and keep a tab on all the supply chain costs involved in the process.
8.Improved Supplier Performance:
A good supply chain management means better collaboration with the suppliers. Small enterprises especially can profit with good supplier connections. This helps the business grow as they form a great part and improved management of the key suppliers can guard you against supply bottlenecks and inventory shortages. In 2013, implementation of supplier performance management initiatives showed an achievement of average cost savings of around 12%, in a study by Aberdeen group conducted for top-performing companies.
CSR or Corporate Social Responsibility has a huge impact on a company’s reputation and its growth. Young hires are now looking for ethical organisations with good networking and brand image. Several commercial brands have recently suffered from revenue-loss, mainly due to unethical practices with its suppliers. International dealings must also be well-balanced and transparent practices in SCM, focussing on integrity and an ethical responsibility helps the organisation in the long run.
10.Efficient Inventory Management:
A few enterprises do not rely on inventory. Got it. But, even though yours is a service-oriented industry, you need to move items through a supply chain. Be it spare parts, equipment or any other item, that needs to be stocked and provided later, can be treated as inventory. Inventory management is important as it significantly impacts working capital, and in turn, cash flows. Inventory handling becomes more systematized when supply chain is in place as Wilson Mizner of Playwright points out, “If you count all your assets you always show a profit”.
Technology is playing a great role in better management of SCM. Advanced analytics, sensors, artificial intelligence (AI), data governance and robotics are being implemented into the processes. Blockchain concept is being incorporated by various organisations and Internet of Things (IoT) is coming to revolutionize the traditional way of supply chain management. Logistics 4.0 is the new technology that is transforming the way businesses work.
With effective SCM being linked to the key aspects of a business, business owners need to take note of its vital role in the success of the business.