The Importance of an Efficient Supply Chain Management

One of the main goals in a business is to maintain an efficient system of running operations. When businesses maintain efficient operations, it not only increases profitability but, also reduces cost. In today’s globalized market, competition is fierce, as many business entities offer similar goods and services. In order to maintain a competitive edge, efficiency in a supply chain must be a priority. Business entities must be precise and creative in devising techniques to streamline goods along the supply chain.

A supply chain is defined as, a network between a company and its suppliers to produce and distribute a specific product or service to a consumer. Every business that comes in contact with a product including companies that assemble and deliver parts to the manufacturer are included in the supply chain. On the other hand, Supply chain management is defined as the oversight of materials, information and finances as they move from supplier to manufacturer, to the wholesaler, to the retailer then to the consumer.

Supply chain management not only involves integrating and coordinating the flow of good within a company but among companies as well. The process of utilizing materials and labor to produce goods to be sold to consumers, is referred to as the flow of manufacturing cost. The supply chain management system helps this process by reducing cost and complexity of the manufacturing process, specifically for manufactures that require the use of many parts to make products. For instance, in a clothing manufacture, the first item moved into the production line is raw material such as fabric, zippers and other pieces to make clothing.

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The cost of labor is incurred to run machinery and perform other work using the materials.

The items are then packaged and stored until sold to customers once completed, In order for the supply chain management process to be both effective and efficient, a reliable suppliers are required. Suppliers must produce quality products that meet the manufacturer’s need and ensure delivery is always on time. A furniture store that produces high end furniture, requires that its supplier provide metal handles and other attachments for production. It is crucial for the supplier to produce durable pans that work as intended to ensure the furniture produced is guaranteed to last the consumers for years. Satisfaction guaranteed helps to manufacturer to maintain its brand. While it is important to provide quality products to the consumer, it is also import to deliver to them in a timely manner, with globalization, global supply chain management has become a topic of interest in most businesses.

This is because, companies are seeking to reduce cost and purchase risk control while increasing revenue. An example of this is companies that set up factories overseas. Companies benefit from this through tariff and trade concessions, reduces labor cost and logistic cost and capital subsidies in foreign markets. The close proximity to customers and easier access to foreign markets provide room for growth in organizational learning. Due to the complexity of venturing into foreign markets, global supply chain manager face many issues such as supply and demand. Foreign markets are usually competitive therefore; customers are offered a variety of similar products to purchase.

This type of competition often leads to poor forecasting. Subsequently, due to lack of material, companies may not be able to reliably supply its customers. It can also result in excess inventory when customers make purchases from the competitor, comprehensive risk management strategies, reduces the impact of these risks, companies can also utilize global enterprise resource planning tools. In doing this, they can obtain information about actual inventory, customer orders and qualified suppliers in real time. Increasingly efficient supply chain, play a significant role in curbing inflation as efficiencies of moving products from one point to another increase, the cost of labor decreases which in turn decreases the final cost for the consumer.