What is Supply Chain Management and Why is It Important?

Apr 19, 2024

Have you ever wondered about how the new phone you bought online ended up being in your pockets? The process behind ordering the phone and getting it delivered to your doorstep is intricate.

No, it's not magic! But something else! This process is known as supply chain management.

The supply chain is essential for providing the final products to customers from the manufacturing unit. It involves a network of suppliers managed centrally, with each supplier playing a key role in moving products from raw materials to manufacturers to retailers. Therefore, this process ensures that all the parts and materials come together to make the phone and get it to you.

Today, in this blog post, we will learn about this big piece of the puzzle and why it is important for your business.

Let's dive in!

Why is Supply Chain Management?

Every product that we hold in our hands goes through various processes and stages, also known as the supply chain.

For those of you who don't know, Supply Chain Management (SCM) is a procedure of organising and managing all the necessary steps required to form a final product. It also includes the flow of materials, goods, information, and other essential elements. Not only that, but it also manages the connection of a company between its suppliers and customers, encompassing all transactions involved in converting raw materials into sellable products.

Effective supply chain management is even more critical and necessary in the industrial and process industry because:

High Value Materials:

Industries that use costly materials can benefit from efficient management techniques such as just-in-time inventory, which can reduce the costs of holding these materials and allow for more financial flexibility.

Complex Production Processes:

The processes can be complicated and any interruptions in the supply chain can cause a chain reaction that stops production and results in financial losses. So its crucial to have strong planning and strategies in place to manage risks and ensure smooth operations.

Long Lead Times:

Certain industrial materials have extended lead times for procurement, so it is crucial to accurately forecast demand to have the necessary materials available and prevent production delays.

Therefore, effective supply chain management is the backbone of a successful industrial and process industry. Now let's move on to its components to have a better understanding.

Components of Supply Chain Management

Components of Supply Chain Management

Wondering how the supply chain management of any company works? Well, it includes the following components, which we are going to discuss here:
  1. Planning:

    The first step involves planning, where everything is planned related to the resources required to generate the value of the product as per the customer's requirements. This planning process is important to ensure that the supply chain runs smoothly and meets customer demands. Many companies make use of data and analytics to predict demand and plan for the future.
  2. Sourcing:

    After the planning process, the next step entails sourcing, which involves obtaining supplies and materials required to ensure the product is delivered within a specified timeframe. This step also involves selecting suppliers who can provide necessary goods and services for production. Businesses need to maintain good relations with these suppliers to oversee and control the supply chain effectively.
  3. Manufacturing:

    The manufacturing phase involves handling the processes of receiving raw materials, producing the product, conducting quality testing, packaging the product nicely, and ensuring timely delivery. During this phase, the production operations may be changed to meet customer demands for efficiency, which may lead to adjustments in the supply chain.
  4. Delivering:

    The process of moving products from suppliers to customers is known as transportation. This is where you need to exercise extra caution in deciding the form of transportation, planning the delivery routes, and ensuring the product must be delivered on time, as specified earlier. Also, e-commerce sellers can keep customers informed about their deliveries and quickly resolve any issues that may arise.
  5. Returns:

    Sometimes, unfortunately, your customers might not like what you have delivered to them, and this is where reverse logistics start. This means, that now you have to implement and oversee procedures for handling defective items, requesting refunds, and managing product recalls.
Now let's have a look at the essential role SCM plays in revolutionising your business performance. Importance of Supply Chain Management

Importance of Supply Chain Management

Effective supply chain management can provide many benefits to an organisation in terms of reducing costs and minimising resource and time waste, thereby improving production efficiency. If you are wondering how implementing the right SCM strategy can yield happy customers that drive happy profits, then worry not!

We are here to provide you with the benefits of supply chain management for your business:

  1. Reduced Costs:

    Having an efficient supply chain can reduce the need to store large amounts of inventory. This ultimately reduces the various costs associated with stocking inventory like insurance, maintenance, warehouse rent, security, etc.
  2. Improved Supplier Relationships:

    Having an effective supply chain management system improves communication and collaboration with suppliers. By working together to improve processes, share forecasts, and address challenges promptly, trust and loyalty with suppliers can be built. This can result in benefits such as better pricing, early access to new materials, and improved ability to respond to changes in demand.
  3. Providing High-quality Value:

    By incorporating quality control and assurance measures through the supply chain, businesses can identify and address defects to enhance overall quality. Thus, in this way, SCM can allow you to stay on par with your competitors by ensuring the delivery of quality products and services to customers.
  4. Enhanced Resilience:

    Enhanced resilience is crucial for businesses to overcome unforeseen disruptions such as natural calamities or pandemics. Implementing strong practices, such as having multiple suppliers and disaster recovery plans, can enable companies to effectively cope with challenges and sustain their operations during critical periods.
  5. Global Trade Facilitation:

    Well, having streamlined supply chain management can ensure efficient international trade. Harmonising regulations and customs procedures helps goods move smoothly across borders, ultimately driving global economic expansion.
  6. Optimised Shipping:

    Small businesses in the UK are facing higher logistics costs, which can be mitigated by consolidating distribution channels and utilising logistics specialists. By streamlining shipping processes and reducing the number of suppliers, businesses can improve cash flow and profits. This further addresses inefficiencies in the supply chain.
By reading the above benefits, it is clear that responsible supply chain management practices and models also play a significant role in boosting the economy, improving customer satisfaction, and building a more durable and sustainable future.

What Makes Refteck Your Right Partner in SCM?

Supply chain solution companies can be a valuable asset in overcoming challenges in today's market. Refteck's experienced team can tailor their services to meet your specific needs.

So contact us, and we will handle the rest. Our supply chain management strategies will help you cut costs, enhance your company's worth, and improve operational efficiency.

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