Why is supply chain management important?

Why is supply chain management important?

Liron Oren

Written By Liron Oren

08.08.2024

Business Improvement
Jigsaw Supply Chain
Supply Chain
< Blogs < Why is supply chain management important?

For businesses, many problems can be traced back to the supply chain. Oftentimes, this is simply because businesses with a heavy focus on production, such as manufacturing or construction, lack the resources to effectively manage their supply chains. It could also be the case that something has gone wrong in third party collaboration within the supply chain. It is exactly for these reasons that the supply chain must be managed more closely. In this post, we discuss the importance of effective supply chain management (SCM) for business leaders.

What’s involved in a supply chain?

A supply chain is made up of a series of individuals and businesses all contributing to the creation and/or sale of a product. The chain follows the entire product lifecycle, from producers of raw materials all the way to the delivery drivers responsible for transporting the finished product to the customer (or the shop where it’s sold). The exact structure of a supply chain will vary depending on the business, industry regulations, and the product in question. Most probably, parts of the chain exist overseas. These are all factors that must be considered in the pursuit of effective supply chain management.

It isn’t always the case that the supply chain is solely concerned with the physical act of producing. Instead, supply chain components can fulfil the function of marketing, research & development, finance, customer service, distribution, packaging, and more. As a result, a supply chain might contain:

  • Distributors
  • Vendors
  • Transport companies
  • Retailers
  • Fabricators
  • Producers

Benefits of proper supply chain management

Managing all the different parts of a large supply chain poses unique challenges which continue to evolve over time, as new markets and new products can both result in links being added to the chain. Nevertheless, proper supply chain management can yield many positive outcomes by achieving business process improvement.

One of the greatest benefits of good supply chain management is that you gain an insight into how your business is operating. Areas of inefficiency should become immediately apparent, especially if there are alternatives that can be incorporated into the chain to save on time and resources. For example, an overseas material supplier might have been selected years ago when costs were favourable but changing market conditions might mean that a domestic supplier is now a better option to improve efficiency through simplified logistics and inventory reduction.

Every stage in your supply chain contributes towards the overall quality of the product. As a result, close monitoring allows you to implement quality control measures at key points. This will also help make sure your business is creating a positive customer experience. This can include optimised distribution channels and transparency over relevant policies.

Effective supply chain management helps make sure your inventory is optimised, ensuring carrying and storage costs are kept to a minimum. Leading on from this benefit is the ability to conduct proper resource allocation, ensuring that each stage in the chain isn’t causing operational costs to inflate. Furthermore, proper management will allow the business to accommodate higher demands at peak times in the year, as well as flexing down when demand increases.

Having an intimate knowledge of your supply chain enables transparency of your costs, resulting in the ability to seize on opportunities for improvement when they arise. This may be for cost cutting, lead times reduction, quality improvements, bulk purchasing deals, and more.

Effective supply chain can improve the image of the business in the eyes of your suppliers as well as customers. This signals that you are reliable to work with as a third party, as good management of the supply chain leads to a timely and efficient allocation of resources and elimination of wasteful activities. Business partners also tend to place a high value on good communication across the supply chain.

Tips for effective supply management

Managing a supply chain means taking steps to make the entire structure as efficient as possible. As such, attention should be given to each link in the chain to look for waste or find potential causes of disruption. Although the most important phases of a supply chains are often considered to be sourcing and manufacturing, planning and returns should not be overlooked. Corrective and preventive actions can be effective in boosting credibility. For instance, minimising delays and facilitating customer returns when things go wrong.

Ideally, you will establish your supply chain in the early stages of the business’ lifecycle. That way, the supply chain is integrated into the existing structure of the organisation, making it easier for supply chain managers to monitor effectively. When changes are made to the supply chain, it’s important to communicate them throughout the company. This ensures that everyone is aware of the changes, their impact, and who’s accountable for them.

 

Supply chain consultancy services

The supply chain contains all the parts of an operation that can add value to the business. Due to that, supply chain management is essential to the long-term development of your company towards its goals. The Jigsaw Business Group provide dedicated support services for comprehensive supply chain services, from supplier selection and qualification, through suppliers project management, launch (NPD/NPI) and operational improvements, to suppliers cost reduction, inventory management and de-sourcing activities. All our consultancy is bespoke to your industry and considers each component within your supply chain. Contact us today to begin your journey to a brighter future for your business.

< Blogs < Why is supply chain management important?

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