Supply chain management has never been easy, but the last two decades brought challenges that previous generations of supply chain professionals could not have foreseen. From economic challenges to digital disruption, including the emergence of e-commerce and predictive analytics, global logistics & supply chain strategies look very different than they did at the start of this millennium.
While supply chain management has evolved with technological advances, the need for the process of supply chain management continues to grow. Supply chain solutions requires smart, savvy experts to utilize the latest technology to execute effective supply chain strategies.
Top companies today use technology to manage their global supply chain and meet consumer demand without maintaining a large back-stock of inventory. By leveraging data to adjust to market demands dynamically rather than waiting for the end of the quarter to adjust supply, businesses can free up capital for expansion, reduce inventory storage costs, and help ensure just-in-time delivery of product.
What is supply chain management?
If you're a small business owner wondering about the importance of supply chain management, some insight into the role it plays in a successful, growing business may help. Consider this your intro to supply chain management, or the basics you need to help create effective supply chain strategies down the line.
Supply chain management refers to optimizing the steps required to deliver a finished product to the customer. This begins with product development, followed by the procurement of raw materials to produce the goods, and extends to manufacturing, packaging, warehousing and distribution. Several other steps also go into global logistics & supply chain as well, including marketing, operations, finance and customer service.
With so many elements at play, it's easy to see the importance of supply chain management for your bottom line. Cutting costs in any step of the process in a way that won't adversely affect the quality of the product or its delivery time could improve profitability.
Additionally, by reducing the wait time between a customer's request for a product and fulfillment of the order, you could boost brand loyalty and increase customer satisfaction. You also have less product in the warehouse, tying up cash flow. You may be able to recoup your inventory investment more efficiently and can reinvest your profits into growing the business.
It's important to understand the difference between supply chain management and business logistics, which is just one link in the global supply chain. Logistics deals with every step in the supply chain beginning with the production of goods from raw materials to the moment the customer receives the product. It does not refer to marketing, product development, finance, or aspects of operation unrelated to procurement, manufacturing, warehousing and distribution.
Some might argue that logistics is one of the most critical aspects of supply chain strategy. Successful global logistics & supply chain strategies help close the gap between the time your company pays your suppliers for materials and invests in the manufacturing processes to when you get paid by your distributors or the end customer.
Why supply chain management matters to business success
Strategic supply chain decisions, especially in the digital age, can make a difference between the success and failure of a company.
Because supply chain strategies relate directly to the delivery of products to customers, a successful supply chain can help boost profitability and help your business grow organically. An effective supply chain strategy can help:
- Reduce customer complaints if the right products are delivered on time and as requested
- Result in repeat business and word-of-mouth referrals for business growth
- Improve after-sale service if parts are available quickly for repairs
- Enhance your brand's reputation as a source that distributors, retailers, and customers can count on
A successful supply chain strategy could also have a positive effect on your company's cash flow behind the scenes. By maintaining and ensuring proper inventory and the most efficient processes, it can help:
- Decrease procurement costs
- Reduce production costs
- Streamline manufacturing processes
You could also increase retailer and distributor satisfaction. Those comprising your supply chain may be more willing to promote and sell your products if they can do so at a higher profit margin and be assured their customers will receive them in a timely manner.
In the digital age, fast delivery and customer satisfaction is more important than ever. Consumers know that businesses have the resources available to meet their demands – from overnight shipping to customer service bots that can respond to requests or complaints in real-time, 24/7. A company that embraces these technologies as part of their overall global logistics & supply chain strategies could develop a competitive advantage.
Strategies for better supply chain management
Your supply chain strategy, meaning how your company addresses ever-changing marketplace demands, can play a key role in your profitability. These five supply chain strategies can help improve cash flow, set your company apart from competitors, and help ensure adequate product supplies to meet market demand.
- Leverage technology to gauge real-time demand, along with predictive analytics to help stay ahead of the demand curve. Wouldn't it be great if you had a crystal ball to predict market demand? Or software to show when outside factors, from natural disasters to cash flow issues, might affect production from your suppliers? No matter which end of the supply chain you're on—manufacturing, wholesale or retail—these insights can help you better manage production, distribution and cash flow, as needed. Insights into market demand can help you scale production so customers aren't waiting for their product and you're not sitting on inventory you can't move. Today's cloud-based technology can help you view inventory status in real-time and also stay in touch with your supply chain partners so you know what challenges they might be facing.
- Be ready to adapt production as the market changes. Today's hot seller may be sitting dusty on the shelves once the holiday season shifts to drab January days. In past decades, companies would wait until the end of the month, quarter or year to make production changes, scaling up to meet demand or slowing down if sales slowed. Today's real-time data and cloud analytics, however, allows companies to shift production at any time for increased profitability.
- Seek out opportunities for innovation. From the software you choose to manage your supply chain effectively to product development, innovation is critical to stay ahead of competitors. Seek out ways to incorporate sustainable raw materials and manufacturing practices to help position your company for future success. Be open to new manufacturing and distribution methods and, of course, seek to create groundbreaking products that meet consumer needs.
- Integrate sales, operations, finance and marketing with production, distribution and operations for a holistic approach to supply chain management. With access to real-time data and predictive analytics, it's more important than ever that all departments work together to stay agile. When every link in your supply chain works together, it's easier to adapt to ever-changing marketplace trends and demands.
- Choose the right supply chain partners. Just as you must integrate the different departments in your organization, it's important to choose supply chain partners as agile as you are, who will leverage technology to help maximize success.
You need supply chain partners who can work with you to help you meet your goals. Whether it's offering favorable trade terms to improve cash flow or willingness to ramp up production to meet consumer demand, supply chain partners who can move quickly, be flexible and align with your company's mission, vision and values can play a role in your company's success.
It's important to define the people, processes and practices that will help maximize your supply chain strategy. Today's technology can help at every step, from procurement to delivery.
By making strategic supply chain decisions, choosing the right supply chain partners, and implementing state-of-the-art, technology-based supply chain solutions, you could help fulfill customer needs, solidify your brand's reputation and boost your bottom line.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.