6 Benefits of Supply Chain Management for Small Businesses
Damini Ralleigh3/10/2022What are the benefits of supply chain management?
Supply chain management is the process of planning, organizing, and controlling the flow of materials, information, and finances in a business. When a business has a successful supply chain, it can improve its product and service quality and increase revenue. Many businesses use it to help with efficiency, cost reduction, and customer satisfaction. The benefits of supply chain management are numerous. This article explores the key aspects of strategy and outlines the major benefits of implementing a supply chain management program into your company's workflow.
What are supply chain management systems?
These are centralized management systems that include all the processes that transform raw materials into finished products and manage the flow of goods and services. Typically, supply chain management systems centrally control a product's production, distribution, and shipment. By putting a good supply chain management system in place, companies can streamline business activities on the supply side and maximize customer satisfaction while acquiring a competitive advantage in the market. This is achieved by keeping a tight rein on inventory control, internal production processes, distribution, sales as well as vendor inventories. The most important elements of effective supply chains are strategy development, raw material sourcing, production distribution, and returns.
Various risks that supply chain management is exposed to
Supply chain management comes with risks and disruptions, but these can be mitigated with a risk management plan. Some of the risks in supply chain management are-
Logistical Issues- Supply chains are made of various steps procurement of raw materials, manufacturing the finished product, warehousing, delivery. Even a slight delay in any of these can disrupt the entire chain.
Financial Fortuities- Money runs business operations, and supply chain management is no exception. If a business fails to invest money in an effective supply chain, operations will cease.
Natural or Man-made Disasters- Natural disasters can cause devastation that not only temporarily halts but destroy your inventory or disrupt supply chains. Even man-made setbacks, such as labor strikes, can cost businesses big money. Similarly, wars, terrorism, stock market crashes, or countries falling out over bilateral agreements can affect the health of economies and disrupt supply chains.
Security Breaches- E-commerce shows no signs of stalling, and studies estimate a 265% growth rate from $1.3 trillion in 2014 to $4.9 trillion in 2021. But an expansion of this kind also increases the risk of security breaches. Therefore, it is essential to carefully manage the cybersecurity aspect of supply chains to ensure that operations are not hindered.
How can supply chain management streamline organisational processes?
There are several advantages of supply chain management, and we will discuss these in greater detail in this article. But one of its many benefits is the streamlining of organizational processes for increased revenue, fewer inventory holdings, and reduced supply chain costs. Here are a few tips for developing a seamless flow of supply chain management processes-
Review Supply Chain Management Processes- It is important to have an effective review process in place to ensure streamlined manufacturing and production as well as savings for both the company and its customers. An efficient review of supply chain management processes also helps businesses increase ROIs and develop lasting partnerships.
Revising Sourcing Strategies- It is difficult to find partners that offer high-quality goods and services at low prices with short lead times. It is, thus, important to develop strategies that help uphold the objectives and standards of your business and drive it towards greater success.
Reduce Shipping Costs and Time- Reducing lead times, and associated costs can positively impact any business. And there are several ways of achieving this. One is partnering with third-party logistics companies that offer special prices to their clients and help forge lasting relationships with suppliers.
6 Benefits of supply chain management
Supply Chain Management includes innovation strategies, integrated logistics, manufacturing tactics, and forecasting demand. It helps with optimizing operations and seamless inventory management while ensuring outstanding customer service. There are several benefits of supply chain management, and some of the advantages of supply chain management are discussed below.
1. Smooth collaboration with suppliers
Lack of communication with vendors and distributors can lead to confusion. One of the primary benefits of supply change management enables seamless coordination between business entities to deliver products and services to customers. Supply Chain management software ensures that you can easily communicate with the involved parties while offering you accurate, real time reports, quotations, and forecasts.
2. Better quality control
Supply Chain management software ensures that you and your suppliers work to achieve the same standards. It, thus, becomes easy to detect quality control issues at an early stage. Easy and effective collaboration between you and your vendors will enable you to streamline the production and distribution process. This will eventually translate to the company's bottom line and put you in a position to stay ahead of your competition and maximise your profits.
3. Shipping optimisation
Costs associated with shipping and logistics are said to rise significantly and will impact small businesses the most. Reducing the number of distribution channels and collaborating with logistics specialists can help bring down costs and maintain a strong cash flow and profits.
4. Reduced overhead costs and inventory
One of the reasons why supply chain management systems are popular with companies is that they can reduce costs considerably. An effective supply chain system can lessen the burden of maintaining inventories, thereby cutting overhead costs related to storage and security. Though, it must be noted that lean inventories put pressure on distribution networks and affects the resilience of supply chain systems to shocks. It is, thus, imperative to identify and maintain optimal inventory levels. Once this is done, a supply chain system will not only help you save money but also stabilize relationships with vendors and distributors while ensuring top-notch customer service.
5. Robust cash flow
Supply Chain systems constantly deal with complex demands, product portfolios, and supply networks, and these constraints must be tackled to achieve optimization. Based on healthy supplier relationships, an efficient supply chain can help sustain strict quality and stock control while managing costs. Thereby improving cost management and cash flow.
6. Better visibility and data analytics
Supply chain management software ensures that businesses stay in touch with suppliers and distributors through mobile apps or shared dashboards. These tools can also help businesses track stock, manage distribution channels, and monitor performance in real-time. Having access to accurate data helps businesses ready contingency plans and take advantage of opportunities when they arise.
