4 Benefits of Effective Supply Chain Management
The supply chain process is important to the success of your business. It encompasses the business production process from the purchase of raw materials to the sale of final products.
The success of any business is dependent on the quality of its supply chain management (SCM). Companies with poor SCM are likely to suffer adverse effects to economic crises.
Unfortunately, many businesses ignore the role of SCM in their operations. Instead, they focus on other areas of business operation giving SCM the least strategic attention.
But that’s not all, statistics show that SCM is the least understood area of business management. Investing in IBP software can help you understand and plan your supply chain management.
A 2014 survey by Deloitte shows that businesses with effective supply chain management increase their revenue growth by 79%. Only 8% of businesses with less capable supply chains increase their revenue.
Here are the benefits of quality supply chain management in a business.
1. It Focuses on The Consumer
The success of any business relies on its ability to generate and increase its sales revenue. Your business should do this by improving the quality of customer service while also meeting their expectations.
Meeting the needs and expectations of your customers through demand planning helps them to develop brand loyalty. As such, any successful SCM strategy should focus on the customer.
2. Helps You Save on Cost
The SCM is all about meeting your customer’s demand. However, one must be careful to protect against wastage of funds in the exercise.
The outlay of supply chain management influences the production cost. If the costs are in excess, they’ll consume your working capital or block cash flow.
The supply chain management strategy helps a business remove processes and activities that add no business value. The result, a reduction in cost which increases the sales revenue and improves cash flow to your business.
3. Helps You Deal with Uncertainties
A good SCM strategy helps business owners to identify the weakest link in the process. In most cases, these links are factors that are not under your direct control. For instance, your business suppliers.
Identifying the weaker link doesn’t mean you cut them off. Instead, it allows you to strengthen them to meet your business objectives.
For instance, your suppliers play a vital role in your business success. The best you can do is working with them to reduce supply chain uncertainty. The collaboration helps guard against inventory shortages and supply bottlenecks thus affecting your sales.
4. Higher Efficiency Rate
As an entrepreneur, you may create a clear and workable plan. But the uncertainties in the market may force you to adjust your plans.
For instance, having real-time data on manufacturing delays and the unavailability of raw materials helps your business to implement contingency measures. These may include buying materials from a different supplier to avoid further delays. But how will you initiate this plan B if you don’t have real-time data?
The global SCM is changing towards a data-driven supply chain management. With this, a company can monitor the flow of goods and services from the acquisition of raw materials, until the products are sold to the end consumer. SCM helps project any uncertainty along the way and facilitates the initiation of plan B to ensure the consumer gets the product on time and at a fair price.