In the last few years, empty shelves, product shortages, and inflated prices have become a part of everyday life, posing challenges to businesses and individuals alike. All three are signs of a disrupted supply chain and examples of the dangers your organization may encounter if it doesn't take supply chain management seriously.
What Is Supply Chain Management?
Supply chain management is the process of nurturing a product’s entire journey, starting from the raw materials used in its production through delivering it to the customer. Those responsible for managing the supply chain are involved in designing, planning, and executing the process, as well as controlling and monitoring it to ensure it continues to deliver efficiency and value to their company.
Each stage of the journey is important; they all contribute toward the quality of the end product and must coalesce to create an infrastructure that can be relied on.
Why Is Supply Chain Management Important?
Supply chain management is crucial not just because of the impact it can have on your organization when it’s done well, but also when it’s done badly. If you fail to adequately manage your supply chain, your organization may experience:
- Issues with the quality of your product or service.
- Expensive delays in production and delivery.
- Reputational damage.
- Legal problems should elements of your supply chain fail to comply with the law.
However, if you manage your supply chain well, it will give you a competitive advantage over your rivals, help you navigate unexpected challenges and times of severe disruption, and act as a strength for your organization.
Benefits of Effective Supply Chain Management
- Build Successful Relationships with Suppliers: When you manage a smooth supply chain, you’ll have regular contact with suppliers. In doing so, you’ll be able to find the right partners and work with them to develop long-lasting, successful relationships.
- Maintain Quality Control: Full oversight of your supply chain means you can govern the processes that determine the overall quality of your products and ultimately set your own standards.
- Reduce Your Overhead Costs: When you have built a resilient supply chain, you can lower inventory levels and reduce your overhead costs. You should, however, invest time in identifying your optimum inventory level to avoid shortages if you face unexpected demand or disruption.
- Better Mitigate Risks: If you fail to manage your supply chain effectively, you are unlikely to identify potential problems in the process. With a clear oversight of the entire process, you’re better positioned to protect your organization against those issues.
- Improve Your Cash Flow: Working with reliable suppliers, maintaining the quality of your product, reducing your costs, and protecting yourself against major risks all contribute toward improving your cash flow.
What Does Good Supply Chain Management Look Like?
With the efficiency of your supply chain being so decisive in the success of your organization, it’s important to understand how to manage it effectively. Here are a few best practices that will help you maximize the efficacy of your procurement processes.
Build Flexibility to Cope with Change
The last few years have shown that few were prepared to cope with disaster and continued supply chain disruption. As part of managing your supply chain, you should ensure you’re able to quickly adapt to unpredictable events, whether they be unforeseen changes in demand or sudden product shortages. In doing so, you’ll protect your organization from the worst effects of any unexpected challenges.
Utilize and Respond to Real-Time Data
Too often companies rely on historical data to make decisions. In today’s volatile financial climate, relying on the past has the potential to result in poor choices. Make use of real-time data generated by your business, your suppliers and partners, and other reliable sources to make decisions about your supply chain that reflect the present, not the past.
Incorporate Your Supply Chain in Business-wide Planning
The supply chain is such a critical part of your organization that it should be integral to your overall operational planning. Synergizing your sales, operational, financial, and supply chain plans will ensure that your resources are used optimally and the supply chain choices you make contribute to the overarching direction and overall success of the company.
Conduct Regular Reviews
With any important business process, regular reviews are required to enable you to effectively refine and optimize them. Even if you believe your supply chain is running smoothly, you should schedule routine reviews to assess new data, get updates from partners, and generally ensure your expectations are being met at every stage.
Choose and Vet Suppliers Carefully
The partners you select to keep your supply chain running smoothly will determine its success. Do your research to find suitable options; you could consider issuing request for proposals (RFPs) if you want to choose from a variety of suppliers; and be sure to vet each of them thoroughly before making a final decision.
Alternatively, if you want to save time and resources and have an experienced organization connect you to pre-vetted, reliable suppliers, then joining a group purchasing organization (GPO) like CNECTÂ is a great option. We work with more than 3,000 exceptional suppliers to provide our 8,000+ members with the supply chain solutions they need, as well as exclusive prices and free membership.