One of the biggest challenges that companies face today is how to efficiently manage their supply chains. The traditional methods included the development of a “chain of command,” whereby various parties in the supply chain communicated with one another regularly. This streamlined the process of completing various tasks that are part of the supply chain Management, such as receiving orders, materializing raw materials, processing finished goods, storing finished goods, transporting finished goods to customer locations, and so forth. However, in an age of globalization and rapid technological change, it has become increasingly difficult for companies to effectively manage their supply chains. Improved management of the supply chain allows for greater efficiency, fewer lost opportunities, higher profits, lower losses, and safer products or services than ever before.
The key to supply chain management benefits include greater traceability and accountability, enhanced flexibility and control, lower costs, enhanced security, and improved productivity. Increased traceability and accountability refer to the ability to monitor and track the activities of vendors and others who are involved in the supply chain management process. Enhanced flexibility refers to the ability to tailor the processes and procedures according to changing circumstances, market conditions, or other external factors. Lower costs, including those associated with errors and delays, result from efficient, cost-effective management of the complex steps of the supply chain. Enhanced security usually refers to the ability to prevent the theft or destruction of important supplies or materials.
Improved cash flow
Improved cash flow is another benefit of supply chain management. The term “cash flow” is usually associated with the operation of a business that generates a profit. Such as a manufacturing plant that processes raw materials into finished goods. A distribution facility that delivers finished products to customers, or a utility company that provides the water and electricity that facilitate business operations. Improved cash flow enables companies to meet customer demand. And to effectively negotiate terms related to the sale of goods or services to customers. Companies also can improve their cash flow by reducing over-filling. Which is the condition in which too many unsold items are stored when a company is undergoing seasonal shortages or other forms of inefficiency.
Control refers to the ability of a company to affect the supply chain management process and outcome. For example, a company can affect its own supply chain management processes. By making choices about which suppliers it purchases raw materials from. Whether it contracts with suppliers to buy its needed supplies. How it distributes surplus materials to customers, how it assembles and sells finished products. How it delivers and displays its merchandise to customers. Similarly How it maintains its inventory levels, and how it makes sure that all of its partners in the supply chain process are operating within the parameters of its policies and practices. A company also can affect its supply chain management process by managing its relationships with suppliers. For example, a company can optimize its relationships with suppliers by reducing over-supply. And under-supply, identifying the appropriate balance between inventory, sales, and manufacturing.
Data-driven SCM focuses on improving supply chain management through a sound data-driven approach. Data is considered a key tool for companies using SCM, so companies that use such must include data. As part of their process of developing and maintaining a robust supply chain. The development of a data-driven set is based on the five elements of data: date, price, scope, information, and impact. Companies use the date as a fundamental concept of data-driven SCM.
Pricing is an important factor of supply chain management. Because it affects both the amount and quality of inventory that a business can manage. Pricing is also affected by demand, because supply chain management systems cannot be effective if companies do not know how much they should be selling to consumers, where they should sell the inventory to, how much they should charge for that inventory, and when they should sell it. Because of this, companies rely heavily on pricing to determine their inventories, the value of their inventory. And the amount they should pay their suppliers for those inventories.
Affect of demand on supply chain management
One aspect of supply chain management that many companies overlook is the effect that demand has on supply chain . When a company needs to meet consumer demand. It must increase the amount of inventory it has in order to meet customer demand. If demand increases too fast or too far in either direction. Then companies experience a “bullwhip effect”. This means that the company can experience both positive and negative effects when it tries to meet consumer demand.
Another important aspect of supply chain management deals with the transportation of goods in and out of the company. Transportation can either improve or hurt supply chain performance. For example, if a company needs to ship quickly to meet customer demand. It might benefit from purchasing its inventory in bulk. If transportation slows down the process, however, then it might decrease supply chain productivity. Companies should also take into consideration the Transport and Logistics costs they incur when they ship inventory to customers.