The Importance of Supply Chain Management

Objectives of SCM
The key strategic objectives of SCM are as mentioned below:

Maximizes operational efficiency: Effective management of inventory, transportation and logistics can be challenging and requires good understanding of the processes. When the product manufacturers, wholesalers and retailers collaboratively work on the supply chain system, it maximizes the operational efficiency.

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Optimization of transportation and logistics: In an independent business context, the company is bestowed upon the roles and responsibilities of ordering, shipping and transportation of goods. However, in such a business framework, the cost tends to be higher due to poor time management and co-ordination. SCM allows for optimization and smooth flow of the processes by keeping the suppliers, wholesalers and retailers on the same lines. Automatization of orders and notification updates about other functionalities are put into the system.

Quality improvement: To provide customers with value-added products or services is an important objective shared by partners in the supply chain. As coordinating with the intermediaries enables to improvise on product/service quality. Thus, the collaborative and co-coordinative supply chain creates a system where the company and other trail partners in the supply chain obtain customer feedback.

Importance of SCM
The importance of SCM on both the customers and the organization is outlined below:

Enhanced customer service: SCM processes enable to enhance the quality of customer service. If practiced effectively, it allows for smooth and correct flow of the products at the right time facilitating customer loyalty.

Reduced operational costs: The significant advantage of SCM is reduced operational cost. SCM processes limit the cost of procurement, production and supply chain as a whole. Thus, accelerating economic progress of the company due to increased profit margins and cashflow. SCM best practices also minimize the excess use of fixed assets such as storehouses and vehicles by redesigning the network and limiting the cost of owning extra assets.

Societal safety: SCM plays a critical yet unacknowledged role in society. It ensures human survival by delivering necessities such as food, water, healthcare and electricity to homes and businesses.

Employment opportunities: SCM also improves quality of life by creating job opportunities, providing a platform for economic growth and uplifting living standards. It creates multiple work avenues, as the SCM professionals manage and design various roles in supply chains.

Components of SCM
The essential components of SCM are as elaborated below:

Planning: Companies are required to effectively plan and manage all the resources to meet the customer demands. Being the primary stage of the supply chain process, planning is about designing the layout and deciding on the metrics to be used to attain the organizational goals.

Sourcing: Companies are required to list out the suppliers to source the raw materials required for manufacturing of the product. Upon getting the supplier contract, various processes to manage the supplier relationships are executed.

Making: Supply chain manager’s co-ordinate and monitor the activities such as sourcing inventories, product manufacturing, quality testing, packaging and delivery scheduling. Organizations evaluate quality, production output and worker performance to ensure products/services meets the quality grade.

Delivering: Often termed as logistics, delivering includes coordinating customer orders, delivery planning and scheduling, consigning loads, invoicing consumers and receipt of payments. It depends on the trail of vehicles to deliver products to customers.

Returning: A supplier requires a response-oriented and resilient network to take back excess, faulty or obsolete products. If the product is erroneous, it has to be repaired or scrapped. And if in excess quantities, it has to be returned to the warehouse for sale.

Enabling: To function effectively, supply chain requires a support of peripheral services to keep a track of information across the chain and ensure regulatory compliance. These processes include Finance, Human Resources, Information Technology, Portfolio Management, Product Designing, Quality Control and Sales.

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