Supply chain management, or SCM, involves making sure your business is getting raw materials/goods in the best way possible, processing those goods correctly, and delivering them to your customers on time. Many companies use SCM on a daily basis, including manufacturers, distributors, wholesalers, online retailers and similar companies.
There are many details of this process, and understanding how they work is important. Why should you pay attention to how you manage your supply chain? According to American Express, great SCM can provide numerous benefits for your business.
Higher Profits
One advantage of having a streamlined supply chain is having increased revenue and profits. Analyzing your company’s supply chain gives you valuable perspective and different steps in the journey of your products. Many of these nodes offer opportunities to reduce costs.
For example, you may find suppliers that offer raw materials at lower prices or in larger quantities. You may save money on distribution by partnering with a transportation business that works outside of the box. The more options you have, the more opportunities there are to negotiate prices of raw materials or finished goods with suppliers.
Better Product Quality
Cutting costs doesn’t necessarily mean producing an inferior product. By planning your supply chain wisely, it’s often possible to retain or improve product quality. The key is to choose suppliers you can trust. Raw materials of high quality generally lead to superior finished products.
Good communication is key at this step. You want your suppliers to think with your business’s mindset. The best suppliers do exactly that, knowing beforehand when certain products or materials won’t be up to your specs. They can help you avoid problems by resolving the issue themselves or giving you advance notice so you can decide what to do well before the situation creates a problem for your own clients.
More Flexible Business Operations
Having a good relationship with suppliers can also improve your sales operations. How is that possible if both elements are so far apart for business operations? It has to do with customer satisfaction and expectations.
Strong sales depend on understanding what your clients want and being able to deliver exactly that. To be able to fulfill your obligations, the supply chain needs to do its part smoothly. Late orders can destroy customer trust, which in turn hurts your sales.
Good SCM makes your business more flexible in emergencies. When you have great suppliers backing you up, you’re better prepared for the unexpected. That means choosing your suppliers wisely. You want companies that are willing to help you out in emergencies. They should offer practical solutions if something goes wrong, such as providing backup methods to obtain key products.
Happier Customers
Above all, SCM helps you keep your clients happy. No customer wants to hear that their order won’t be coming for several weeks or has been indefinitely delayed because of shipping issues. No client wants to discover defective products or finished goods that are incorrect.
On the other hand, when you deliver products on time and on budget, clients keep coming back. They may even increase their ordering habits or turn to your business to source all of their products instead of just a few. The key is consistency, which is what SCM does best.
Better Cash Flow
An important part of SCM involves planning. You can’t close your eyes and hope products end up at their destination as requested. A great side of planning out each stem of the supply chain is that it gives your team insight into the costs associated with each step. If you involve your finances in the discussion, it can help you keep plenty of working capital on hand for each need. For example, planning bulk purchases of raw materials at the right time can help you have cash for other needs when they appear.
All of these factors come together to improve your brand’s recognition and reputation. That’s priceless.
