Don’t Underestimate the Importance of Supply Chain Management! Here’s Why is Affects Your Whole Business!

importance of supply chain management

Almost half of supply chain managers are looking to enhance their ERP system integration and functionality. Why do this? So they have full visibility of their supply chain.

These managers know and understand the importance of supply chain management. By using data analytics, they can influence the performance of the entire company.

When was the last time you took a critical look at your supply chain? If you can’t remember, or never have, then you are overdue. Keep reading to learn why supply chain management is so important and how to get started managing yours.

Importance of Supply Chain Management

Without a well-functioning supply chain, your entire business can grind to a halt. But it isn’t enough to simply have a working supply chain. Proper management will optimize it so that your business can reap the many benefits.

Better Customer Service

In today’s world of e-commerce, you can’t afford to have products out of stock. Online consumers expect to order their product and receive it within a few days. If you can’t deliver to these expectations, your customers will go to your competitor next time.

But it isn’t just about getting your inventory to your shipping warehouse. You also need to make sure that you can get your customer’s orders to them in a timely fashion.

You need to look for ways to ensure you send the right ordered product to the right customer. Then it needs to be in perfect condition when it gets there.

Managing your supply chain ensures you have the right processes in place to ensure you have adequately packaged your shipments. This will reduce your need for sending replacement products.

Reduced Operating Costs

Managing your supply chain ensures that you have an optimized system which will reduce your overall logistics costs. Let’s say you have an expensive inventory.

You don’t want to keep a lot of product in stock in your warehouse. This will tie up your liquid working capital in inventory. But this means you have less inventory on the shelf.

Now your risk of selling out increases. This is where managing your inventory becomes so important. You can create an agile supply chain that will allow you to get new inventory quickly when needed.

Increased Bottom Line

There’s a delicate balance that businesses play when it comes to budgeting and their bottom line. What if you could increase profits by merely adjusting your supply chain?

By streamlining your processes, you can reduce costs, which lowers your overhead and increases your net profit. Now you’ve given yourself a raise without having to increase your prices or sell more product.

Streamline Physical Assets

Most companies start with one small warehouse, their business grows, and soon they run out of space. They then find a bigger warehouse or begin renting more space in their current one. This incremental trend continues until they have a large warehouse facility.

Without supply chain management, the company will run the large facility the same way they ran their first small space. This is ineffective and will cost the company excessive time and money resources.

If the company has someone actively engaged in supply chain management, this won’t happen. As the company’s needs grow, this person will evaluate the space to determine the ideal setup for the area.

This will ensure that the company doesn’t take on more warehouse space than they need. Then the space that is used is optimized for functionality.

Now the company is responsible for fewer physical assets. This applies to the size of the warehouse, the number of shelving units, and any other equipment.

How to Manage Your Supply Chain

If you haven’t managed your supply chain, there’s no better time to start than the present. Start by breaking up your supply chain into seven easy to manage parts.

  1. Purchasing
  2. Manufacturing
  3. Inventory Management
  4. Demand Planning
  5. Warehousing
  6. Transportation
  7. Customer Service

Purchasing

Start at the beginning of the supply chain process with purchasing. This is how you source the goods or services needed. Try to find a solution that’s a balance of price and quality.

Look to minimize the amount of cash you have tied up.

Manufacturing

Take a look at where and how you manufacture your products. For some companies, the excess cost of manufacturing by hand in the United States is a cost they are willing to pay. For others, moving overseas is a viable choice.

Speak with several manufacturing facilities to determine which is the best option. Compare their scalability and additional services.

Inventory Management

Inventory management tends to be the most significant demand for cash assets for companies. You need to find the right balance of in-stock inventory. This means having enough on hand for customer demand but not too much that you have cash tied up and are paying for excess warehousing.

Look into deploying inventory management and tracking systems. The most advanced ones utilize a barcode scanning system to track each item individually.

At the very least, you want your inventory tracking system to integrate with your other business management systems. For instance, it should tie in with sales, so you know when stock runs low. It should also connect with finance, so you monitor costs effectively.

Demand Planning

It’s a blessing and a curse when you get surprised by high demand. You have great sales, but your inventory is in no way sufficient.

Demand planning prevents the shortage and excess inventory. This will streamline the process and ensure you are prepared for both.

Warehousing

As we discussed earlier, evaluate the size and space of your warehouse. Choose a warehousing system that best compliments your business.

Consider working with a logistics provider who can offer flexible warehousing space. This will allow you to grow and shrink your warehouse usage with your demand, making your business nimbler.

Transportation

Without the right transportation in place, nothing else matters. If you can’t get your product to your warehouse or the customer, then you’re done.

Working with a freight broker is the smartest way to manage your transportation needs. They leverage their much larger shipping volume to secure you the best rates.

Customer Service

After your product goes through the entire supply chain process, it finishes with customer satisfaction. This is key because if the customer isn’t happy, you may have to do the whole process again by sending out a replacement product.

This is twice the work for the same pay. So securing customer satisfaction improves your overall bottom line.

Start Managing Your Supply Chain

Now that you understand the importance of supply chain management, what can you do for your company? Use our seven-step analysis to work your way through your supply chain to cut costs and streamline operations.

Consider working with a logistics partner who has experience. They can help guide you by providing innovative solutions.

Request a quote today and let’s get your shipments moving.

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