How Supply Chain Management Can Benefit Organization
What is Supply Chain Management?
Supply chain is the network of services, material, and information flow that link a firm’s customer relations, order fulfillment, and supplier relations processes to those of its suppliers and customers. So, Supply Chain Management is the overseeing / management of all the services, material, and information that flows through an organization. In other words, SCM involves the operation or management of many organizations’ processes and procedures.
What are the Drivers of SCM?
The capabilities of supply chain are guided by the drivers, to provide a useful framework for the overall functionality of the organization’s supply chain management. There are four main drivers for the SCM system performance, which are:
- Facilities
Facilities are the places in the supply chain network where product is manufactured, stored, or shipped. The two major types of facilities are production sites and storage sites. A company needs to decide how many suppliers, manufacturing facilities, distribution centers, and warehouses to have.
- Information
Information consists of data and analysis concerning facilities, inventory, transportation, and customers throughout the supply chain.
- Inventory
Inventory is the raw materials, work in process, and finished goods that belong to the company. A successful inventory management policy is to achieve that right balance of responsiveness and efficiency.
- Transportation
Transportation moves the product between different stages in a supply chain. The type of transportation a company uses also affects the inventory and facility locations in the supply chain.
Key Flows of Supply Chain Management
There are three key flows of SCM, which are the three things that SCM can help organize to make it easier for the organization to operate efficiently. Those three key flows are:
- Product Flow
The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs.
- Information Flow
The information flow involves transmitting orders and updating the status of delivery.
- Finance Flow
The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.
Benefits of Supply Chain Management
If implemented correctly and accordingly to the organization, SCM will allow the organization to optimize the three key flows. SCM could help optimize those three key flows by:
- Optimizing the Time for Goods to Reach te End Customer.
Time-to-consumer could be made more efficient, by improving the quality of the Product Flow. Effective SCM enables the organization to improve Product Flow through accurate demand and sales forecasting and improve inventory management to avoud underproduction.
- Making a Seamlessly Connected Information Flow
Organizations with effective SCM can remove the bottlenecks (a process that has limited capacity) of the Information Flow, by helping them evaluate the quality of information sharing, then implement other proposed solutions that are best to fill the gaps of the bottlenecks. By doing so, it is less likely for the organization to avoid missed opportunities and possible risks.
- Enhancing the Financial Flow
In an organization, it can be a burden to organize thousands of invoices and payments every year. The unpredictability and variability of the financial flows can add more complexity to the Financial Flow. Implementing SCM can help organizations to address those challenges, allowing them to evaluate the problem and the solution to help min-max their current process.
By min-maxing and optimizing the Product, Information, and Financial Flow, the organization can create new market opportunities, since the organization have more resources to do other stuff. With an effective SCM, the organization can identify and fill all the gaps, lower the costs of business processes, and enable a more efficient workflow within the organization.