Supply Chain Management Critical For Growth

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Supply Chain Management Critical For Growth

Supply chain managementSupply Chain Management (SCM), or the “active management of supply chain activities to maximise customer value and achieve a sustainable competitive advantage” is at the core of today’s global economy. Without stellar SCM, the online economy would not exist. Yet, this important aspect of every company’s sales and distribution network is a mystery to the general public. That is partially because when strong SCM protocols are in place, smooth transition from sale to distribution to customer is fluid and transparent. Only when that smooth delivery system is not in place, we tend to become aware of exactly how many working parts exist in supply chain management.

SCM represents a “conscious effort by the supply chain firms to develop and run supply chains in the most effective and efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.” When we think of receiving goods, we tend to think about logistics but as we can plainly see, logistics is merely one element in the chain.

The concept of SCM is based on two central ideas:

  1. Every product that reaches an end customer is the result of collaboration between multiple organisations or departments.
  2. Historically, most enterprises only pay attention to processes under their own control. This creates an environment where the margin for error is larger than necessary.

Today, organizations in a supply chain are linked together through information flows and the physical flow of goods. SCM has been around for a long time but in today’s economy there is more attention to detail. In this ultra-competitive environment, a solid SCM network ranks highly in customer satisfaction surveys.

Misunderstandings About SCM

Despite the need for strong SCM protocols, there still remain misunderstandings and myths about this vital part of every business. Below are common myths that every company should understand.

Implementing SCM Does Not Always Add Value

We assume that implementing SCM solutions benefits every enterprise but actually this is not the case. Like every other element of a business, there are good SCM solutions and there are bad SCM solutions. All elements of the SCM solution must work fluidly in order for the network to produce good results. Every department or partner in the chain influences the effectiveness of the system and either causes the customer to have a positive of negative experience and opinion about the seller. In truth, SCM solutions must be measured for cost-effectiveness as well as by the reliability and communication capabilities of the partners.

The Internet has Reduced the Supply Chain Cycle

While it is true that the Internet has greatly expedited the order processing capabilities of enterprises, it is not true that the Internet has dramatically helped SCM. While ordering is ideal for the Internet, back-office operations are not as fluid. There are many working parts in even the most solid chain and coordinating those parts is challenging. As third-party transportation and outsourcing warehouse space become more popular practices, organisations are relinquishing some control over the supply chain. Another factor that affects SCM is investment. If inventories are low, efficient supply management becomes more challenging.

SCM portals are temporary

The theory that SCM portals will fade away as the economy improves is untrue. Businesses will not return to in-house distribution in the future. SCM is solidly entrenched in portals involving third-party providers. However, communication between customers, third-party providers and transport companies is challenging. And, to complicate matters further, many companies competing globally must engage multiple supply chain communities and sources. Communication in and between these communities is one of the biggest challenges the industry faces.

We Can Handle it

There is a certain stubbornness in many businesses. These businesses disdain modern day SCM and are determined to handle distribution internally. This is not cost effective. In most cases, internal processing adds to the complexity of the transaction and increases the margin for error. One of the tremendous advantages of today’s logistics is the tracking capabilities of provided by transport companies. Data supports that third-party warehouse and packaging enterprises are more efficient at storage and packing than most internal operations.

Investment in SCM Yields Rapid Returns

It seems logical that investment in SCM would yield quick returns. This is usually not the case. Disrupting the chain is risky business and can be expensive with no guarantee of a better solution on the back end. One of the advantages of outsourcing is that the enterprise can concentrate on sales and generating revenue. Another disadvantage of investment in SCM is that the business will meet additional expenses in the future. The reason to invest is to regain control but the enterprise might be better served by fine-tuning existing networks, improving communication between principles. In the end, third-party providers play an important part of the global distribution network. Manage them carefully for best results.

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