In a competitive environment, the long-term survival of a business is dictated by the efficiency of the supply and delivery process it has implemented into operations. Small businesses often run into the risk of being driven out of business if they fail to deliver customer the products within the stipulated time frame. For this, they need an efficient supply chain management in place. So, what is supply chain management and its advantages? Read on to find out.
What is Supply Chain Management and its Advantages?
Supply chain management refers to the broad range of activities right from planning, controlling and executing a product’s flow from production to distribution to the end customers. For small entities, a robust supply chain management results in:
1. Minimisation of costs
Note that production costs are determined by factors including warehousing and transportation activities. An ineffective supply chain management leads to poor management of warehouses resulting in subsequent delay in transportation, which escalates the overall cost of production.
On the other hand, with an efficient supply chain management in place, companies can expedite shipments and close order on time, thus improving bottom-line revenues. It also eliminates the need to store items in warehouses for a longer period, thus bringing down costs to a great extent.
2. Greater efficiency
Business efficiency depends on multiple factors and one among them is the ability to keep track of the raw materials, components and supplies on a real-time basis. By implementing an automated supply chain management software into operations, small enterprises can keep a close tab on these and take the necessary steps to facilitate and optimise the flow of products, thereby improving business efficiency.
Most automated supply chain management software have features such as purchase management, advanced material management, inventory and warehouse management, supplier relation management and sales order and invoicing among others. All these features help organisations get a holistic view of their operations, thus resulting in greater efficiency.
3. Quality assurance
Defects and rework attributed to a weak system can raise the cost of doing business. At the same time, it can lead to poor customer experience, thereby leading to a poor brand image. On the other hand, a robust supply chain management through quality management systems in place ensure that quality standards are met at each stage of production and delivery.
This is highly important for small organisations looking to expand operations overseas because production standards differ across countries. In such a scenario, it’s difficult to monitor and maintain quality. An effective supply chain management can make the process much easier and agile.
4. Seamless flow of information
Customers today are a lot more demanding than before. They want real-time information, response and access to a product. For this to happen, it’s imperative for small entities to ensure that the information is complete and the flow is uninterrupted.
An efficient supply chain management can help firms evaluate not only the quantity but also the quality of information shared across stakeholders. Not only this, companies can also identify the loopholes and take corrective steps to fill the gaps. It also helps to gain visibility of all transactions, thus aiding in better decision making.
5. Mitigate risk
Risk mitigation is an important part of operations. Every business needs to mitigate risk and it’s even more essential for small entities as they often lack the financial muscle to deal with losses arising due to perils such as poor quality of product and non-compliance with the applicable laws among others.
Supply chain management and methodologies assist organisations to identifying such risks and take corrective measures beforehand. Without such a system, enterprises expose themselves to various legal risks and liabilities.
Thus, through a robust supply chain management companies can reduce waste, overhead costs and delays and improve efficiency and profitability in the long run.