Top 5 benefits of Supply Chain Management: How SCM benefits your business?

Supply chains are the lifeline of businesses, and they exist all around us. We live in a complex world with a large network of interlinked businesses. Larger supply chains are difficult to manage, as they are more likely to experience disruptions and risks. Explore the key benefits of supply chain management, including improved efficiency, cost reduction, and enhanced business performance. Unlock your potential today!

Supply chain disruptions can cause a massive 62% loss in finances. Logistics and company reputation are two other business aspects that see an average of 54% hit.

Top companies understand the importance of an efficient supply chain and hire supply chain managers to optimize the process and achieve higher productivity. 

Supply chain consists of a series of activities starting from the stage of raw material sourcing to final product delivery. A well-managed supply chain is one which needs continuous monitoring and control at all levels. 

Let us look at the definition, concept, and benefits of supply chain management. 

What is supply chain management?

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Supply chain management (SCM) is the process of managing all activities in a supply chain so as to achieve a competitive edge in the market and maximize customer value. 

Supply chain management starts with the procurement of raw materials and moves through different phases like manufacturing, storage, transport, and final delivery to the end customers.

SCM plays a vital role in the success of any business as it helps to minimize risks and maximize efficiency. Whether a small organisation or a large multinational company, SCM has become inevitable for success.

Benefits of supply chain management (SCM)

Effective supply chain management provides the following five major benefits to an organisation. 

1. Cost reduction

SCM integrates the latest technology and software which can help to identify customer demands and market trends. By analyzing this data, organisations can forecast the future and make strategic decisions to optimize costs. 

Supply chain managers perform collaborative planning, data analysis, and demand forecasting to make supply chains more efficient and adaptive to changes. SCM can reduce the bullwhip effect in the supply chain and lower inventory costs. Reducing safety stocks will reduce material costs, transport costs, and labor charges.

2. Increased revenue/Improved operational efficiency

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Streamlining the production and inventory management process will cut costs and improve positive cash flow in the business. Organisations use technology to respond quickly to changing demands and market environments. 

The availability of products in the market, timely delivery, and invoicing can help increase sales and revenue for a company. SCM enhances the effectiveness of a supply chain, increases customer satisfaction levels, and promises uninterrupted cash flow in an organisation. 

3. Higher productivity & asset utilization

Another key benefit of implementing supply chain management in business organisations is higher productivity and optimized asset utilization. By effectively managing assets such as workers, inventory, machinery, buildings, etc., companies can achieve higher productivity in their supply chain operations. Assets can include tangible and intangible assets of a company that is capable of producing value.

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Analysis of real-time data and smart automation solutions can help companies to optimize inventory levels and reduce the wastage of resources. Better planning and strategic decision-making can make supply chains more resilient and cost-effective. 

4. Improved risk management

Supply chains are always prone to disruptions and various other risks. Be it quality issues, manufacturing errors, delayed deliveries, or other environmental issues, there are too many challenges involved in a supply chain. 

87% of companies believe they could reduce inventory by 22% if they better understood their supply chain risks.

Supply chain managers devise risk management strategies and come up with backup plans to respond dynamically to changing situations. SC managers take proactive measures to mitigate risks and supply chain disruption. By monitoring real-time data and analyzing potential risks, companies can implement lean operations in their supply chains.  

5. Better supplier collaboration visibility

Effective SCM results in good supplier relationships. SCM encourages organisations to maintain healthy relationships with suppliers and distributors. Improving collaborations with suppliers and vendors helps to cut down costs and get more profits for your business. This will also ensure the sustainability of a business in the long run. 

Nowadays various SCM software is available to find the right suppliers and compare prices. It helps companies make informed selections depending on their needs. 

Wrapping up on 5 top benefits of supply chain management

Apart from the above-mentioned benefits of supply chain management, there are many other advantages to implementing supply chain management. As businesses are becoming more aware of these benefits, they are looking for skilled supply chain managers who can efficiently manage their SC operations.  

If you are keen to explore a career in supply chain management, we recommend you pursue an EMBA in Supply chain and logistics.