Supply chain management involves the integration and management of the entire production process of a product within the organization as well as across the different channels and members of the supply chain. The importance of supply chain management is realized by all transportation and logistics companies.
Having a proper understanding of supply chain management and why it is important is crucial for the whole transportation sector.
Supply chain management implies active management of supply chain activities to increase customer value and gain a sustainable competitive advantage. Supply chain activities include product development, production, packaging, shipping, warehousing, delivery, retailing, and information systems and technology.
With the advent of advanced technology such as cloud transportation management system (TMS), a massive potential for supply chain management has been unlocked, allowing most supply chain managers to seamlessly work in real-time in association with the members of the supply chain.
Using technology, companies can overcome several trucking challenges. Let’s discuss the benefits of supply chain management for businesses and customers.
The majority of today’s businesses recognize the significant role their supply chains play in their ability to gain a competitive advantage in the marketplace. According to a recent report by Research and Markets—a global provider of market data—the projected growth for the global supply chain management market between 2020 and 2027 is 11.2 percent.
It goes without saying that supply chain management has become an integral part of business and is vital for any company’s success. It also has the power to lead a business to greater heights.
So, what is the importance of supply chain management? Why should every business take notice of it? Read the blog post to know some of the key benefits of supply chain management.
Effective supply chain management helps in lowering operating costs. In fact, the importance of supply chain management can be witnessed the way it has a trifold effect on the operating cost. Not only does it decrease purchasing and production cost, but it also reduces storage cost.
Retailers depend on supply chains to deliver products quickly to the customers so they can avoid holding expensive stock in storage units for longer periods. Consequently, this lowers the purchasing cost.
On the other hand, manufacturers depend on supply chains to deliver materials to assembly plants so they can avoid material shortages that would bring down production costs and facilitate a cost-effective and seamless production process.
Last but not least, effective supply chain management optimizes warehouse space and makes use of the most efficient technology, inventory management tools, and accounting methods, reducing the storage cost. As a result, this helps the business gain a competitive edge in the market.
Another benefit that represents the importance of supply chain management is that it helps businesses increase efficiency. When a company’s supply chain operations are strategically planned and executed, it can predict demand more correctly and develop the most efficient strategies to cater to it.
As a result, this improves the fleet efficiency of a company and helps them cater to uncertainty, disruptions, and fluctuating industry trends. Furthermore, when companies have real-time data on the availability of raw materials and manufacturing delays, they can implement backup plans such as sourcing materials from a backup supplier, preventing further delays.
It has been observed that businesses perform at a high level of productivity when they use advanced technology and business practices to meet the customer demand better, and each segment in the lifecycle of the product is optimized to the fullest capacity.
During such a situation, businesses experience increased sales, improved brand image, and ultimately greater profits. As a result, they witnessed improved cash inflow.
Efficient supply chain management is directly proportional to the quality of a company’s products and services. Supply chain management directly influences the quality of the products and services. Companies having better control over their suppliers revel in improved quality control.
Process guidelines can motivate suppliers to comply with the company’s quality requirements. This compliance contributes to customer satisfaction, normalization, and sustainability. By analyzing performance data, companies can team up with the highest-performing vendors and suppliers to maintain strict quality control. This helps in creating and retaining a stronger brand image.
Besides helping companies achieve increased profit levels, effective supply chain management directly influences the company’s fixed assets and cash flow. Implementing the appropriate automation solutions and optimizing the warehouse design to improve productivity go a long way in optimizing the company’s fixed assets, including the fleet of vehicles, warehouses, and production units in the supply chain.
Supply chain management also utilizes the most appropriate accounting methods that help disclose the liabilities and unprofitable sectors in the business. Companies can take the necessary decisions to either improve or discard such parts. Hence, efficient supply chain management improves the overall financial situation of the business.
Apart from the businesses, the supply chain importance is realized by the customers. Below, we have discussed the supply chain importance for customers and how supply chain management extends benefits to them.
Efficient supply chain management enables businesses to optimize their logistics operations to ensure smooth order fulfillment. Supply chain data can disclose potential risks, allowing businesses to create backup plans to respond to unlikely circumstances quickly. This practical approach and streamlined operations reduce the possibility of deliveries so customers can receive the products on time.
As we have already discussed, efficient supply chain management provides several benefits to businesses, including reduced operating costs. With reduced costs and higher profits, businesses can bring down their market price. This eventually gives benefit to the customers as they enjoy the lower prices.
Inarguably, companies using efficient supply chain management are in a better position to offer better prices to the customers as compared to the ones using poor supply chain management.
Supply chain management has the power to rule the two most significant parts of customer satisfaction—price and delivery. Companies with efficient supply chain management have a greater chance of beating their competitors on the retail price and improving profitability.
With optimized and streamlined operations, companies can ensure smooth and timely delivery of products to customers. By opting for the best technology such as cloud-based TMS software, approaches, and partners within the supply chain, companies can offer a better quality of service, transparency, and visibility to their customers. As a result, the customer experience becomes better.
Supply chain management extends its benefits to both businesses and customers. With efficient supply chain management, companies can anticipate problems in the life cycle of the product, improve inventory and order fulfillment, and optimize prices.
On the other hand, it also offers several other benefits, including improved quality control, quicker deliveries, and fewer delays. Nevertheless, the ultimate goal of effective supply chain management is to generate greater profits through improved customer experience and satisfaction and lower operating costs, hence helping both the company and its customers.
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