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The Importance of Supply Chain Management

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Supply chain planning is an important part of supply chain management. Supply chain management is a necessary process for many businesses and there are a number of benefits, including better success.

Improve Customer Service

Customers expect that the correct product quantity and assortment is delivered. Customers also want products to be available at the right location. For example, your customer satisfaction is going to diminish if your auto repair shop doesn’t have the right parts in stock and you won’t be able to fix your customer’s car for an extra two days. Customers also expect products to be on time. For example, if Christmas gifts are delivered after December 25th or the pizza delivery is an hour late then you aren’t going to have very happy customers. Customers also want products to be surfaced quickly and have the right after-sale support. If a home furnace stops working in winter and repairs can’t be made for a few days then you will once again have unhappy customers.

Lower Your Operating Costs

Supply chain planning can help you reduce your operating costs by decreasing purchasing costs, decreasing production costs, and decreasing the total supply chain costs. Retailers depend on different supply chains in order to quickly deliver expensive products and avoid costly inventories in warehouses or stores longer than necessary. For example, stores that sell electronics need fast delivery of plasma TVs in order to avoid the high inventory costs. The manufacturers depend on the supply chains in order to deliver materials to assembly plants and avoid any shortages that would cause shutdowns. If there is an unexpected parts shipment that delays an auto assembly plant, it may cost $20,000 per minute and this is millions of dollars in lost wages. Both retailers and manufacturers depend on supply chain managers that design networks that meet customer service goals at the lowest costs.

An efficient supply chain enables a business to be more competitive in the marketplace. For example, Dell’s supply chain involves making a computer based on a specific order then shipping it right to the consumer. This means that Dell is able to avoid having large inventories in retail stores and warehouses, and this saves millions of dollars. It also means the company was able to avoid having a computer inventory that could become obsolete quickly due to the rapidly changing technology.

Better Financial Position

With management, you are able to increase profit leverage, decrease fixed assets, and increase cash flow. Businesses place value on supply chain managers since they can help reduce supply chain costs. This means an increase in profits. Managers also decrease the use of fixed assets, such as transportation vehicles, warehouses, and plants in the supply chain. If a supply chain expert is able to redesign the network in order to serve its customers from seven warehouses instead of 11 then the company is able to avoid paying for four expensive warehouses. Managers can also speed up product flows to customers. If a company is able to make a product in 50 days instead of 70 then it is able to invoice the customer 20 days sooner.

Supply Chains Play an Important Role in Society

While supply chain planning and management is important for any business, supply chains have a necessary role in society. Humans depend on supply chains in order to deliver necessities, such as water and food. Breakdowns in these supply chains can be detrimental to human life. People also rely on these supply chains to deliver critical healthcare solutions and medicines. Supply chains also protect humans from different climate extremes by efficiently delivering electricity to businesses and homes.

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