Supply chain management is an important business activity for any company that sells products. From a simple one-man Amazon business to a multinational corporation selling millions of units yearly, supply chain management is an absolute necessity to making sure that both the financial model and the distribution model are as good as they can be.
Ultimately, the supply chain exists to guide the creation of product to meet consumer demand. It starts from the raw material all the way to the finished good in the consumer’s hands. But how is this entire process managed, and why is it important to do so?
To understand this, we must understand what supply chain management is. Supply chain management refers to the process of making sure that goods are able to be placed in the consumer’s hands, when they need it, and at the price that makes sense for the business. Companies that neglect supply chain management do themselves a great disservice.
So what is the overall goal of supply chain management? Here are the three main goals, explained.
Efficiency refers to the minimization of waste. Waste can exist in terms of wasted materials, wasted money, wasted man hours, wasted delivery time, and much more. Making sure that waste is at a minimum is a key component of supply chain management.
How does supply chain management reduce waste? By managing production, inventory, transportation and logistics, supply chain management aims to look for opportunities to change procedures in order to cut down on waste. For example, by sharing inventory data with your supplier, and keeping it updated in real time using ERP software, the business can replenish inventory quickly to keep up with customer demand.
Reducing waste isn’t the only goal of supply chain management. Making sure that the product and the customer experience are as positive and as effective as they can be is another significant goal.
For example, if retailers are able to communicate feedback from the customer to your company about your product’s experience, you’ll be able to know what things you can change in order to improve it. Or, if there’s an issue with a supplier for a specific part that a customer has discovered, you can address that issue with customer feedback and relay those changes back to that supplier or switch suppliers.
Supply chain management is also about improving and maintaining overall stability of the supply chain. Companies can aim to forge and maintain strong relationships with their suppliers and distributors to make sure that business continues to run smoothly.
There are other aspects to stability, mainly with risk management. By keeping an eye on possible risks associated with parts of the supply chain, a business can take steps to alleviate the risk.
● Supply chain management looks at the process behind how goods are made, delivered, and sold to the consumer.
● Supply chain management aims to reduce waste wherever possible.
● Supply chain management can be used to improve the quality of the customer experience.
● Supply chain management looks for long term stability of the overall supply chain.