Over the past decade, supply chains have become essential to business operations, efficiency, and long-term profitability—which means that anything that might disrupt a supply chain represents a direct threat to the business as a whole, making supply chain management more important than ever.
But what exactly is supply chain management?
Supply chain management (SCM) is the coordination and management of activities involved in the production and delivery of a product or service. It includes the management of suppliers, manufacturers, warehouses, and transportation, as well as coordination with other departments within an organisation, such as sales, marketing, and finance.
Ultimately, the goal of supply chain management is to optimise the flow of goods and services to meet customer demand while minimising costs.
This article will examine 6 things you need to know about supply chain management to ensure continued business success—in 2023 and beyond.
1. Leads to cost savings
Supply chain management (SCM) is the coordination and management of activities involved in the sourcing, procurement, conversion, and logistics management of goods and services. Effective SCM can lead to cost savings in a number of ways.
First, by implementing strategic sourcing techniques, a company can negotiate better prices with suppliers. This can be achieved by consolidating purchases, standardising products, and leveraging the company’s buying power. Additionally, by implementing just-in-time (JIT) inventory management, a company can reduce the amount of money tied up in inventory, as well as reduce the costs associated with storing and managing excess inventory.
Second, by implementing logistics and transportation management strategies, a company can reduce its overall transportation costs. For example, by implementing a transportation management system (TMS) a company can optimise its shipping routes and modes, reducing the number of miles goods are transported and thus reducing fuel costs. Additionally, by implementing cross-docking and consolidation techniques, a company can reduce the number of times goods are handled, thus reducing labour costs associated with handling and storage.
Finally, by implementing end-to-end visibility and real-time monitoring of the supply chain, a company can better anticipate and respond to disruptions and changes in demand. Additionally, by using data analytics, a company can identify inefficiencies and bottlenecks in the supply chain and take action to address them, further reducing costs.
2. Improves efficiency
SCM can greatly improve efficiency by streamlining processes and reducing waste throughout the entire supply chain.
This can be done through the use of technology.
Automated systems and digital platforms can be used to track inventory levels, monitor supplier performance, and optimise logistics routes. This allows for real-time monitoring of the supply chain, enabling companies to quickly identify—and address—any issues that may arise. Additionally, digital platforms can be used to streamline communication between different parts of the supply chain, allowing for more efficient coordination and collaboration.
Another way SCM improves efficiency is through the implementation of lean principles and practices.
By eliminating waste and reducing non-value-adding activities, companies can improve overall efficiency and responsiveness. For example, implementing JIT inventory management can reduce the need for excess inventory, freeing up space and reducing costs. Similarly, implementing process improvement techniques can help companies identify and eliminate bottlenecks and inefficiencies in their processes.
Efficiency can be achieved through:
- Real-time monitoring and visibility of the supply chain
- Streamlining of communication and collaboration between different parts of the supply chain
- The implementation of lean principles
- Optimising logistics routes and modes for reduced transportation costs
- Enhancing supplier performance through strategic sourcing and supplier management
3. Ensures the timely delivery of goods and services
One way SCM can ensure timely delivery is through effective planning and forecasting.
By using historical data and industry trends, companies can make accurate predictions about future demand and proactively plan for the necessary resources and inventory. This helps companies avoid stock outs and overproduction, thus preventing delivery delays.
Another way SCM can ensure timely delivery is through the use of transportation and logistics management strategies. By optimising shipping routes and modes, organisations can reduce transit times, ensuring that goods are delivered to the right place at the right time.
4. Helps identify and manage potential risks
SCM tools like Prewave can help companies identify and manage potential risks by providing real-time visibility and monitoring of the entire supply chain. Our product can help companies like yours anticipate and respond to any potential disruptions—even months in advance—thus reducing any risks to your business.
Our supply chain mapping tool allows companies to visualise their entire supply chain, from suppliers (including Tier-N) to end customers, identifying any potential bottlenecks or vulnerabilities. By identifying these potential risks, companies can take proactive measures to mitigate them.
Additionally, our software assess and evaluates different risks across the supply chain and prioritises them based on their level of impact. We provide you with all the information you need to develop and implement risk mitigation plans while continuously monitoring and reassessing the risks over time.
Prewave also tracks supplier performance, identifying potential issues with suppliers while helping companies proactively address any issues that may arise—reducing the risks of delays or other disruptions.
Overall, SCM tools like Prewave can be used to identify and manage potential risks by providing visibility and monitoring of the entire supply chain, assessing and prioritising risks, developing and implementing risk mitigation plans, and tracking supplier performance.
This allows companies to anticipate and respond to any disruptions, significantly minimising the risk to the business.
You can learn more about Prewave by accessing this link.
5. Gives organisations a competitive advantage
In today’s business environment, having a competitive advantage has become increasingly harder—and more necessary than ever before.
SCM can give a company a significant competitive advantage by allowing it to optimise its operations and reduce costs.
This can be achieved through a variety of strategies, such as:
- Streamlining logistics
- Identifying and managing risks
- Building strong relationships with suppliers
Additionally, effective supply chain management can improve a company’s responsiveness to changes in customer demand and market conditions, which can help increase revenue.
Overall, a well-managed supply chain can give a company a significant edge over its competitors by allowing it to operate more efficiently and effectively.
6. Can significantly reduce an organisation’s carbon footprint
You can reduce your company’s carbon footprint through SCM by implementing strategies that promote sustainable practices throughout the entire supply chain. Some examples include:
- Optimising logistics
By reducing the distance goods need to travel and consolidating shipments, companies can reduce their transportation-related emissions.
- Investing in renewable energy
By using renewable energy sources and implementing energy-efficient practices, companies can reduce their energy-related emissions.
- Encouraging sustainable practices among suppliers
By setting sustainability targets and working closely with suppliers to meet them, companies can encourage the adoption of sustainable practices throughout the supply chain.
- Implementing sustainable packaging
By using more eco-friendly packaging materials and reducing the amount of packaging used, companies can reduce the environmental impact of their products.
- Carbon offsetting
By investing in carbon offsetting projects, companies can balance out the emissions generated through their operations.