Why Supply Chain Management Is Different For The Manufacturing Industry
Products have become more complex over time
Thanks to the wide array of products available in every industry, businesses have increased the complexity of their products in order to compete. Products that used to be simple are now integrated with the latest technologies in order to make them more attractive to potential buyers.
As a result, we’re seeing an accelerated shift away from companies that do everything in-house, from concept to distribution. 80% of manufacturers are subcontractors, rather than brand owners themselves. Supply chain management used to be much simpler when products were less complex. Now, with more features, more materials, and more steps in the manufacturing process, managing the supply chain becomes crucial to keeping product quality high.
Supply chains have more participants now
This complexity, along with globalization making the world’s markets more intertwined, has resulted in supply chains with a much larger number of participants. In fact, some companies don’t even know the origin of the raw materials that make up the products they sell. This is because many of these companies don’t need to know this information in order to sell products.
If you dig into the supply chain of any of the products your company sells, you’ll uncover a long list of companies that span the globe. This means a larger number of stakeholders involved in the production process, which presents its own array of risks.
One big risk lies in communication. Language barriers, cultural misunderstandings, varying global standards, and mismatched expectations all contribute to the communication risk. Supply chain management helps address this risk directly, while giving the company a greater understanding of the systematic risks that exist in their supply chain.
Benefits of Effective SCM For Manufacturing
SCM helps improve the efficiency of the supply chain. When the supply chain is more efficient, companies are able to save on costs that result from complexity. Costs such as distribution costs, production costs, and even purchasing costs can be reduced through more effective SCM.
Improves communication across the supply chain
For manufacturers, effective communication allows them to meet or exceed their clients’ product standards while also reducing time spent on solving problems that arise due to poor communication. Effective SCM sets standards, expectations, and KPIs and makes them known across the supply chain. This keeps all participants on the same page, which reduces the opportunity for errors in communication.
Looking for supply chain management software for manufacturing companies?
Demand Solutions provides supply chain management software that uses machine learning to drive operational improvements. Our software solutions for manufacturing helps optimize costs, lower lead times, and eliminate the guesswork in your supply chain.