Optimised Supply Chain Management: A Guide
Effective supply chain management (SCM) benefits both businesses and consumers. Proper management can promote the production of higher-quality products and speedier delivery. It helps refine commerce practices and boosts the economy. And with an understanding of how the supply chain works, and what is needed to manage it, companies can establish better business operations.
The stronger a business's supply chain processes, the better the buying and fulfillment experience it can provide for customers. When companies have great communication and collaboration across their multienterprise supply chain network, they can fulfill orders faster, increase data accuracy, and adapt quickly to changing market conditions.
If you want a refresher on supply chain management basics, keep reading. Or, you can skip right to our Tips for Optimising Supply Chain Management.
What is Supply Chain Management?
Supply chain management (SCM) refers to the process of tracking, operating, and analysing supply chain channels, partners, and processes. SCM helps to optimise the various steps involved in getting a product made and distributed, which is especially crucial for enterprise companies and omnichannel sellers. After all, the larger and more expansive a business is, the more complicated the supply chain can become.
In short, supply chain management is the art of keeping things running smoothly.
Why is Supply Chain Management Important
Supply chain management is a crucial activity for most businesses. It is essential for a company's success, and impacts everything from product manufacturing on one end to buyers’ shopping and fulfillment experience at the other. A well-managed supply chain is more than an operational must—when fully optimised, it can drive higher profits and better customer satisfaction.
Here are just a few reasons why strategic, well-thought out SCM processes are so important:
Meet Customer Demand
To succeed in today’s competitive markets, businesses need to not only meet consumer demand, but also stay ahead of it. Well-managed supply chain operations can help:
Anticipate correct product assortments and quantities for procurement/stocking based on customer behavior
Reflect inventory accurately on store shelves or eCommerce product pages
Provide updates on fulfillment to keep customers “in the know”
Deliver the right products, right on time
Deliver on Customer Service
Imagine a pizza shop. Ideally, it should receive orders within minutes of a phone call or online order, make the pizza to the customers’ specifications, and make deliveries promptly. The customer expectation is 30 minutes or less, generally. If the pizza is two hours late due to poor communication between the steps in this “supply chain,” the customer ends up with cold pizza and a good incentive for a bad review. But a pizza that arrives within that 30-minute window with all the right toppings and still piping hot is the perfect recipe for creating a happy, returning customer.
Customers today have high standards for their shopping experience, be they consumers or business buyers. They want a simple buying process, transparency from brands, and packages delivered when they expect them. Supply chain management enables all three.
Control Operating Costs
Supply chain management plays a key role in reducing operating costs. By monitoring the supply chain, businesses can illuminate the areas where their operations could be more efficient.
SCM can decrease costs for the following:
Purchasing: Retailers rely on effective supply chains to move expensive inventories quickly to avoid the cost of holding products in stores and warehouses.
Production: A stock shortage quickly adds up in lost sales opportunities, but excess stock can be just as expensive—not to mention wasteful. Monitoring the supply chain is especially crucial for optimising production processes.
Transportation: Logistics costs are among the highest in the supply chain. Better SCM lets you make strategic logistics decisions that lower costs, like consolidating shipments, negotiating carrier rates, and more.
Unseen Costs: Poor supply chain management can leave your business blind to costs caused by time-consuming manual processes (overhead), data errors (chargebacks), and more.