Effective supply chain management is crucial for business performance and can have a range of benefits, including the streamlined flow of goods and services as well as improved customer satisfaction.
Supply chain management has never been so complex as businesses manage production, distribution and inventory across multiple continents. Technology can be a critical tool to help in this area as it can provide visibility of your supply chain from end-to-end, alerting you to pinch points and inefficiencies. However, research reveals that some business leaders are yet to implement a robust technology solution with 85% saying they struggled with inefficient digital technologies in their supply chains .
We spoke to Rajdeep Gahir, CEO of Wing It Cosmetics, a bespoke cosmetics manufacturer with suppliers in the UK, Asia and Europe, and Chris Eccles of global recruitment technology company Employment4Students to compile the eight most important benefits of effective supply chain management to help you identify what it can unlock in your business.
Important benefits of supply chain management
- Better collaboration with suppliers
- Better quality control
- Shipping optimisation
- Reduced inventory and overhead costs
- Improved risk mitigation
- Stronger cash flow
- A more agile business
- Better visibility and data analytics
1. Better collaboration with suppliers
Suppliers that understand the business’s cost constraints and objectives can be particularly important for businesses with tight margins. Wing It Cosmetics’ Gahir says that manufacturers selling to retail outlets that expect a 40-50% markup on the factory gate price can face a profits squeeze if raw material prices are too high. She recommends when negotiating with suppliers, retail-facing businesses should aim for a “golden ratio” of no more than 25% for raw material prices as a percentage of retail sales.
But cost is not the only consideration. Flexibility matters too. In volatile market conditions, Eccles of Employment4Students found that long-standing suppliers were often more willing to accommodate temporary cash flow difficulties. While it’s tempting to shop around for cheaper alternatives, Eccles warns against it. “Be cautious about switching purely on cost and remember that long-term relationships are valuable,” he says.
And, when it comes to paying suppliers overseas, wherever they might be based, you can manage currency fluctuations and make settling invoices safe and simple with American Express FX International Payments, which offers same-day exchange rates on eligible transactions in over 80 countries, regardless of whether you have an American Express® Card or not.¹
2. Better quality control
When you and your suppliers are working to the same standards, quality control problems can be detected earlier. Gahir gives an example: “One of my packaging suppliers contacted me to say that a batch of packaging that had just arrived wasn’t up to the required standard and she planned to send it back, which would add three days to the delivery schedule.” However, for Gahir, this delay was a better outcome than having to deal with a defective batch of packaging herself. Emphasising the benefits of trust in supplier relationships, Gahir says: “That conversation was only able to happen because we're on the same page.”
3. Shipping optimisation
Logistics costs are set to rise significantly, potentially impacting small businesses across the UK. Reducing the number of separate distribution channels and making use of logistics specialists could reduce your distribution costs relative to your competitors, helping you to maintain stronger cash flow and profits. “Having too many suppliers with independent shipping and delivery streams has been the biggest source of inefficiency,” says Gahir. “We’ve responded to this by looking at storage and shipping aggregators.”
4. Reduced inventory and overhead costs
An efficient supply chain can reduce the need to maintain inventory, therefore cutting overhead costs associated with storage and security. However, a very lean inventory increases pressure on distribution networks and reduces resilience to supply chain shocks. So it’s important to identify your optimal inventory level.
5. Improved risk mitigation
In general, the further along a supply chain issue is detected, the more expensive it is to fix. That’s why supply chain management, which offers visibility of the supply chain from end-to-end, is so important.
For this reason, around 50% of supply chain leaders own all of the six “links” frequently associated with supply chain management: product development; demand planning; supply planning; sourcing and procurement; manufacturing; and logistics and distribution .
6. Stronger cash flow
Running an efficient supply chain that is based on good supplier relationships, maintains strict quality and stock control, and keeps a watchful eye on costs and prices can greatly benefit a business’s liquidity by improving cash flow.
7. A more agile business
“A good supply chain enables us to adapt to opportunities,” says Eccles. For example, Employment4Students identified a process inefficiency in a client’s business. Eccles explains: “We realised we had a couple of suppliers whose software could help and managed to get a process in place really quickly, which they adopted and found really helpful. So, if you’ve got good suppliers, they can help you unlock new opportunities.”
As always, however, it pays to be prepared, as supplier capacity can impede business opportunities. Gahir says that it’s worth investing more up-front to ensure that the suppliers you have in place are able to scale up as your business grows.
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8. Better visibility and data analytics
Business managers can keep in constant touch with suppliers using mobile phone apps, conferencing platforms and shared dashboards. Software tools can also help to manage stock levels efficiently, track distribution channels and monitor business performance. Having real-time data metrics at your fingertips will enable you to put in place contingency plans to enable your business to ride out storms and take advantage of opportunities as they arise.
As you set about improving your supply chain and enjoying the business benefits of efficient supply chain management, you can take control of how you pay your global suppliers and make international payments simple, secure and rewarding with our Foreign Exchange International Payments platform. It offers same-day payments on time-sensitive orders to suppliers², and you can earn Membership Rewards® points on every transaction you make, which you can redeem for rewards in travel, dining and entertainment³.
 McKinsey: Resetting supply chains for the next normal
 Digital Commerce 360: Charts – How the coronavirus is changing ecommerce
 Convey: New survey reveals how consumers shop during COVID-19 pandemic
 Deloitte: Supply chain leadership: Innovation, collaboration, talent alignment
— Update: 19-03-2023 — cohaitungchi.com found an additional article The Benefits of Supply Chain Management from the website blogs.opentext.com for the keyword benefits of supply chain management.
Supply chain management (SCM) has evolved from manual, logistics- and mechanization-focused optimization to modern, digital, and automated integration and coordination of all supply chain elements. It plays a vital role in addressing the growing complexity of today’s global supply chains. Primarily, it facilitates and optimizes the flow of products, information, and finances, allowing companies to create better relationship value and improve overall business efficiency.
But to fully realize the potential benefits of SCM, companies should embrace a data-driven approach, because data is the fundamental element in every aspect of supply chain optimization. Data-driven SCM allows for further competitive advantages such as seamless integration of business elements, schema-on-read approach to supply chain data management, and real-time data transparency.
Supply Chain Management Evolution
Prior to the 1960s, logistics enhancement, mechanization, and warehouse space maximization were the focus of supply chain facilitation. Information management was highly manual, while freight transportation was intermodal. But by the 1960s, trucks eventually became the main container particularly for time-dependent goods. This trend resulted in the conceptualization of Physical Distribution to facilitate an effective confluence of freight transportation, warehousing, and materials handling. Supply chain data management, however, remained highly paper-based.
By the 1970s, the computerization of data began. A decade later, supply chain planners had access to personal computers, which allowed them to enable further logistics optimizations and innovations.
Beginning in the 1990s, the rise of the Internet and other technological advancements led to a sea-change in the management of supply chain networks. Businesses became interested in supply chain management (SCM) and started investing in supply chain management solutions such as Enterprise Resource Planning (ERP) to break information silos, ensure “data accuracy and availability,” and integrate all supply chain functions.
Growing Supply Chain Complexity
Today, companies are modernizing and digitizing their supply chain network to competitively operate at the edge. This supply chain facelift requires an all-encompassing array of strategies beyond mere logistics enhancement and mechanization so that companies will be able to overcome the pressing issues in today’s supply chains.
Supply chain challenges have become more taxing due to the variable, unpredictable demands of today’s customers. Take for example the supply chain challenges in healthcare. Nearly all (90%) of supply chain leaders say that their top challenge is customer demand for faster response times, followed by hiring and retaining a skilled workforce, customer demand for lower delivered costs/pricing, increasing competitive intensity, and rising customer service expectations.
To overcome these challenges, an effective SCM solution should be implemented.
What is Supply Chain Management?
Recognizing the growing supply chain complexity, companies became highly interested in supply chain management (SCM). They realized that they need a powerful array of strategies that can help them cost-effectively facilitate all supply chain processes for enhanced visibility and traceability, minimized wastes and costs, streamlined and integrated operations, accelerated “time-to-customer,” and optimized overall performance.
But what exactly is SCM?
Before we provide a working definition of SCM, however, it is important to understand what SCM is not. SCM is not “inventory management, logistics management, supplier partnerships, shipping strategies, distribution management, logistics pipeline, procurement management, or even a computer system.” But supply chain management systems may encompass all these processes.
Ellram and Cooper (1993) defined SCM as “an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer.” A more recent definition from WhatIs.com states that “supply chain management is the oversight of materials, information, and finances as they travel through the supply chain from supplier to manufacturer, wholesaler, retailer, and customer.” On the other hand, supply chain management is “all about integrating and coordinating all the functions, activities, transactions, and people interconnected in an integral value chain through which products or services – whether physical or virtual – constantly flow back and forth from supplier and manufacturer to distributor and, finally, to consumers.”
Supply Chain Management Benefits
Implementing effective supply chain management using powerful SCM solutions will allow businesses to optimize the three key flows in the supply chain: product flow, information flow, and financial flow.
Improved product and material flow
- Time-to-consumer is a crucial indicator of product flow efficiency. The less time it takes for goods to reach the end customer, the more efficient the product flow. However, there are many other factors to consider such as the quality of the materials or goods that reach customers, the supply and demand balance, shipment options and costs, and inventories.
- Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the bullwhip effect and avoid underproduction. SCM also minimizes delays and allows full traceability and visibility into the movements of goods from the supplier to the customer. SCM enables working strategies that can accelerate time-to-market and optimize business speed, while ensuring high level of product quality.
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Seamless information flow
- “The effective SCM requires not only the integration of material flows but also the integration of information flows in the supply chain (Frohlich & Westbrook, 2001; Trent & Monczka, 1998).” Today, with customers constantly demanding for real-time response and easy access to product and other supply chain content, information flow should be uninterrupted. Intermittent and insufficient information flow due to a fragmented supply chain can lead to poor supplier and customer relationships and huge costs – to the tune of £1.2 billion per year, according to Oracle.
- Companies with effective supply chain management can remove the bottlenecks to supply chain information flow. It can help them evaluate the quality of information sharing, then implement solutions to best fill the gaps. SCM helps design effective best practices to facilitate different types of supply chain information that usually come in different formats and structures. SCM also enables accurate, timely, complete, and relevant information flow to avoid missed opportunities and possible risks.
- Effective and seamless information flow addresses information distortion and miscommunication and promotes enhanced collaboration and relationship value among supply chain stakeholders. It also helps improve visibility into all transactions and accelerate generation of supply chain insights through past reports creation.
Enhanced financial flow
- Another pain point for supply chain players is how to improve cash flow in the value chain, which involves “thousands of invoices and payments in a given year.” The unpredictability and variability of financial inflows and outflows can add more complexity to the inherently complex supply chain financial flow.
- According to Visa, generally, financial management challenges are (1) slow processing due to manual and silo processes; (2) unreliable, unpredictable cash flows because of lack of timely information; (3) costly processes due to compliance and lack of employee empowerment; (4) high Days Sales Outstanding (DSO) caused by invoice reconciliation delays; and (5) suboptimal credit decisions due to manual processes for setting optimal limits.
- Implementing supply chain management can help companies address all these cash flow challenges, allowing them to carefully evaluate their current processes, identify the weakest links that slow down and hamper financial flow, and determine the right solutions to address the problems.
By optimizing product, information and financial flow, companies can proactively create and seize new market opportunities and mitigate risks that can negatively impact their entire business. With an effective supply chain management system in place, enterprises can comprehensively and continually assess their processes, identify and fill all the gaps, lower costs, competently evolve with ever-evolving supply chains, and enable quicker decision making.
Data-Driven Supply Chain Management
To maximize the potential of SCM, however, companies should embrace a data-driven approach because data is at the core of every supply chain transaction and is fundamental to product, information, and financial flow optimization. A data-driven approach to SCM enables seamless integration of business elements, schema-on-read approach to data management, and real-time data transparency.
Data-driven SCM can be achieved by leveraging the OpenText ALLOY™ Platform, which embodies a new approach to integration called Data Platform as a Service (DPaaS). DPaaS is a cloud integration and data management model named for its ability to provide PaaS functionality at the point of data analysis, without the hassle of the underlying data capture, integration, or management mechanics.
Supply chain network complexity is growing as further technological advancements are underway such as 3D printing, “uberization,” IoT, and Mobility. But with effective supply chain management in place – which consists of strategies and best practices for integrating and coordinating all the functions, activities, transactions, and people in the entire value chain – companies will be able to address and adapt to ever-increasing complexities.
To totally maximize the benefits of SCM, companies should embrace a data-driven approach to SCM using the OpenText ALLOY Platform, because data is the basic element in production, information, and financial flow in the supply chain network.
— Update: 19-03-2023 — cohaitungchi.com found an additional article 6 Benefits of Supply Chain Management from the website www.conveyco.com for the keyword benefits of supply chain management.
Effective supply chain management is critical for efficient warehouse operations. Supply chain managers need to learn from historical errors or victories, effectively plan for the future, and proactively address concerns before they arise. This forward-thinking approach is accomplished through a supply chain management process. Here’s an overview of supply chain management and the key benefits of successful implementation.
What is Supply Chain Management?
Supply chain management is a business-focused approach to managing an organization’s product from start to finish in the most efficient and transparent way. Raw materials are converted into finished goods and delivered to clients quickly and efficiently.
The overall objective of supply chain management is satisfying both customers and stakeholders simultaneously. This means an effective supply chain management process delivers goods to customers in a timely and efficient manner while also generating a profit for the company.
The five steps of supply chain management include:
- Designing: Determining what the process will look like, what the goals are, and what tools and technologies are needed to streamline the process.
- Planning: Figuring out how to implement the strategy given the facility’s constraints, how much it will cost, and what the return on investment (ROI) will be.
- Executing: Implementing the process from start to finish by establishing supply chain partners and vendors, managing inventory, and optimizing distribution.
- Controlling: Ensuring everything operates smoothly and consistently, and inventory levels remain steady.
- Monitoring: Setting and measuring key performance indicators (KPIs), and ensuring the operations’ performance aligns with the company’s objectives.
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Facilities that excel in these steps provide their organization a high net value and ROI. These practices are also conducive to the development of an infrastructure that wards off competitors, leverages best of breed logistics practices and material handling technologies, and synchronizes the supply chain while measuring performance levels and KPIs.
Not sure which strategy makes the most sense for your operation? Speak with a member of the Conveyco team!
6 Benefits of Effective Supply Chain Management
Supply chain management helps companies manage the flow of goods from start to finish. As such, the term is incredibly broad and encompasses a wide range of operations. The benefits of supply chain management are similarly extensive. However, here are six positive outcomes of effective supply chain management.
1. Increased Customer Satisfaction
Customer satisfaction is one of a facility’s primary objectives, particularly in ecommerce. Supply chain management plays a key role in customer satisfaction, ensuring companies are able to fulfill promises to customers and deliver products in a timely manner. If a finished product isn’t delivered within two days of the promised date, 69% of consumers say they’re much less likely to shop with that company in the future.
The COVID-19 pandemic has disrupted supply chain operations for many organizations, but only 21% of consumers are willing to forgive companies for pandemic-related delivery challenges. This means that effective supply chain management is a hot button topic when it comes to customer satisfaction.
Supply chain management is also critical to improve total order cycle time, which is the amount of time between an order being placed and when it’s delivered to a customer. While a streamlined supply chain process can improve your total order cycle time, an inefficient process can harm it—damaging customer satisfaction and retention.
2. Effective Inventory Management
Inventory management is critical for warehouse operations to run smoothly. When done effectively, inventory tracking can improve inventory accuracy and inventory visibility. This has several benefits, including:
- Preventing orders from shipping late: Approximately 34% of businesses have had to ship an order late because they didn’t realize it wasn’t in stock. Inventory visibility helps prevent this type of error from occurring and is a vital component of supply chain management.
- Reducing total order cycle time: Without effectively managed inventory levels, delivery times of placed orders will suffer. Supply chain management helps improve throughput time and gets products to customers quickly.
- Improving predictability: The ability to predict how much inventory is needed in the future, based on historical patterns and seasonality, is critical to ensuring a positive customer experience. Predicting an organization’s peaks and valleys is a key part of the supply chain management process, and helps to determine when to bulk up inventory in response to increased customer demand.
Effective supply chain leaders will prioritize inventory management in their supply chain activities to mitigate potential risks of late shipping and increase customer retention. This gives them a competitive edge over facilities that struggle with inventory accuracy.
3. Improved Quality Control
Quality control is an incredibly important part of supply chain management. Supply chain professionals should incorporate regular audits of their vendors and raw materials into their supply chain management process to ensure a consistent level of product quality. This benefits both the facilities and their vendors because it can alert them to potential areas of improvement, allowing them to correct their mistakes before making them with other facilities.
4. Lower Costs
While overhead and operating costs are an unavoidable part of operating a business, it’s the objective of supply chain professionals to lower costs and increase returns. Without effective supply chain management, your facility will experience an increase in costs. Ensuring the product management process goes smoothly from start to finish is essential to reducing your spending and maximizing your profits.
5. Optimized Distribution
Distribution is one of the most important facets of supply chain management. Organizations that excel in distribution increase profitability of their operations by leveraging “best of breed” logistics practices and proper material handling technologies for their facilities.
6. Improved Labor Optimization
Labor is one of the most pressing concerns for modern warehouses. The number of available jobs is at a record high, with more people leaving the warehousing industry than entering it. Furthermore, 71% of facilities typically take more than a month to adequately train new workers. It’s more urgent than ever for distribution centers to find solutions to their top labor consuming applications.
One of the primary advantages of supply chain management is the ability to incorporate automation into the process. It helps determine when automation is appropriate, and how much is necessary for a facility.
How a WES Can Optimize Your Supply Chain
A Warehouse Management System (WMS) is a critical tool for most warehouses, but has several limitations. It’s difficult, risky, and expensive to try and customize. It also tends to be insufficient in addressing all the facility’s needs. A Warehouse Execution System (WES) can augment your WMS, allowing for a higher degree of customization that accomplishes many tasks the Warehouse Control Systems (WCS) and WMS software can’t.
While a WMS is effective at supply chain integration, the addition of WES can optimize your labor and equipment to achieve peak performance from both.
The Importance of RightFIT Order Fulfillment to the Supply Chain
Every business, and distribution center, is different. Therefore, not every tool and technique will work the same for every facility. For this reason, it’s important to ensure the solution is the RightFIT for the problem.
If you’re interested in learning more about how to take a holistic approach to order fulfillment, schedule a consultation with us. In doing so, you’ll be able to speak with one of our experts and learn how to find the solution that makes the most sense for your operations.