Supply chain management (SCM) is a necessity in today’s business world. Effective management, together with modern technology, can help a company reduce waste, speed up processes, and eliminate or greatly decrease problems that arise along complex supply chains.
Nearly every business employs a supply chain of some sort, even if the “supplies” are in the form of valuable data. A weak point in the supply chain can have serious repercussions down the line, sometimes on a global scale.
“Blood diamonds” — jewels mined in war zones and used to fund an insurgency, an invading army, or a warlord — are a recent case in point.
Everledger, a London-based technology innovator, uses a blockchain-enabled platform to keep track of millions of individual diamonds in the marketplace. The company’s system helps jewelers comply with U.S. and international regulations against blood diamonds, according to blockchain experts Michael J. Casey and Pindar Wong in Harvard Business Review.
As business becomes more interconnected and complex, proper supply chain management benefits will become even more apparent. Corporate America will need managers who are well-versed in technology, both for brick-and-mortar establishments and businesses that operate entirely online. Master’s in Business Administration degree-holders can expect to be in high demand in the near future.
Advantages of Improved SCM
A company’s supply chain involves the flow of goods and services from their very beginnings (such as raw materials, component manufacturers, and data sources) to their end stages (including retail shelves, end-users, and clients of service providers).
In the digital age, much of this flow takes place over or is tracked through, the internet. But the supply chain also includes farms, mines, delivery trucks, railway transportation, refiners, suppliers, component assembly lines, warehouses, logistics software, and anything else involved in bringing goods and services to customers and clients.
Better management of the supply chain means greater efficiency, fewer losses, higher profits, and safer products or services. The major supply chain management benefits include:
- Higher Efficiency: The ability to keep track of the flow of materials, components, supplies, and information is paramount to maximizing a business’s efficiency. Dan Dempsey writes on Liaison.com that SCM has evolved into a digital, automated system capable of handling the complex supply chains of today’s business world.
“Primarily, it facilitates and optimizes the flow of products, information, and finances, allowing companies to create better relationship value and improve overall business efficiency,” writes Dempsey.
Quality Assurance: When products are manufactured of components built in other countries with varying regulatory requirements, quality can suffer unless the supply chain can implement a system that maintains quality control across the board, from raw materials to end product.
“Product quality within the supply chain has become a pressing issue,” Joseph DiBenedetti explains in “The Advantages of Supply Chain Management Systems” on Chron.com’s small business site. “Defects and rework attributable to poor systems are raising the costs of doing business. One of the advantages of supply chain management is that it incorporates quality techniques, such as quality management systems, to improve operations.”
Reduced Cost Effects: Proper SCM can lower overhead costs considerably, especially where inventory is concerned. SolutionDots.com itemizes some ways in which SCM can reduce costs in its article, “Top 5 Benefits of Supply Chain Management That Will Double Your Business.”
- Implementing improvements to inventory management systems
- Adjusting storage space to eliminate or reduce damaged inventory
- Making systems more responsive which, in turn, makes customers’ requirements easier to meet
- Building stronger relationships with distributors and vendors
Boosted Cooperation Levels: Before the advent of modern technology, communication between distributors, manufacturers, vendors, and customers/clients was often a significant undertaking. Small issues, such as delayed messages, often blossomed into costly incidents before corrective measures could be taken.
The Academy for International Modern Studies (AIMS) points out in “Key 7 Advantages and Benefits of Supply Chain Management” that the most successful business relationships have excellent communication along the supply chain. Inadequate communication prevents distributors and vendors from knowing what’s going on. Embracing modern technology, however, facilitates instantaneous communication, regardless of the distances between parties.
Casey and Wong, in their Harvard Business Review article, addressed the consequences companies can face when SCM is ignored or sidelined in the decision-making processes. They offer the example of an E. coli outbreak at a Chipotle restaurant that sickened 55 customers in 2015. Because the company relied heavily on ingredients and food products from multiple suppliers, it had difficulty tracking down the source of the bacteria. The company’s share price dropped 42 percent as a result of poor supply chain management.
Businesses that follow well-organized SCM practices can expect to see higher profit levels, raised outputs, lowered delays, enhanced networks, and better efficiency. Improved accountability along the supply chain can make quality easier to maintain and processes flow more smoothly. A managerial presence in the supply chain can keep close track of the flow of supplies and pinpoint potential issues more quickly.
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Harvard Business Review, “Global Supply Chains and Blockchain “
Liaison.com, “Benefits of Supply Chain Management”
Chron.com, “The Advantages of Supply Chain Management Systems”
SolutionDots.com, ” Benefits of Supply Chain Management Software”
AIMS.education, “Key Advantages to Supply Chain Management”