Global trading involves complex steps. It has evolved over the centuries to facilitate more cross border businesses. With the invention of better technology for faster transportation and communication trading has become more efficient. At the forefront of the 21st century trading is supply chain. It has made procuring and supplying raw materials to industries and finished goods to consumers much easier. Here we will get to know more about supply chain management and its role in the economy.

Supply Chain Management (SCM)

In short, supply chain is the chain of events that take place one after another to deliver finished goods to consumers from the raw materials that industries procure to create the finished products. Supply chain management is the supervision of these events to ensure these steps run smoothly without any hurdles. There are various steps in SCM. Planning, execution and monitoring of the steps are some of the important aspects of SCM. These processes are to help in creating better infrastructures to add value to the global trade. Moreover the improvement of logistics enables the system to keep up with the supply and demand, ensuring growth of the global economy.

Key Components of Supply Chain Management

Planning

The centre piece of planning is predicting the demand of products and ensuring the supply to meet the needs of consumers. This ensures enough products are in circulation and there is no shortage or excess. A well planned supply chain minimizes the waste of products. This in turn reduces the cost of doing business.

Sourcing

For any business the one of the most important aspects is procuring raw materials. Cost of raw materials has a huge sway over the revenue of a business. Better raw material translates to better quality products. Sourcing raw materials on time ensures quality of production and cost effectiveness.

Manufacturing

In this step procured raw materials are turned into final products. An efficient production process can eliminate excess cost and the output will be of higher quality. Quality control, maintaining schedules and equipment are important to meet manufacturing standards.

Logistics

Transportation and storage are purview of logistics. They make sure products are delivered on time to the consumers. An efficient logistics system reduces transit time, lower cost for transportation while retaining the best quality of the products.

Returns

It’s important to handle the return of products on time. This enables better customer satisfaction. The return of products is part of reverse logistics. This step gives manufacturers ideas on how to improve their quality to avoid future mishaps. Managing returns, exchanges, recycling and disposal are part of this process.

The Importance of Supply Chain Management

Cost Reduction

The global supply chain management market was worth around $23.58 billion in 2023. It is continuing to grow at a rapid pace as all the industries embrace specialized supply chain management. This is due to the fact that companies can save a huge amount by eliminating redundant inventories through an efficient supply chain management system. By implementing strategies to procure raw materials at a competitive price from various sources it can drastically reduce manufacturing cost. This also adds to the overall cost reduction.

More Efficiency

Better supply chain management translates to faster turnaround of production cycles and also faster delivery of products. Consumers can get their products in time, raising the customer satisfaction. This brings in more businesses. While 12% of supply chain professionals use AI to make the supply chain process efficient, almost 60% of professionals will be implementing AIs to assist in various processes within the next five years. This will enable businesses to make quick changes and adapt to the ever fluctuating market demand.

More Flexibility

The US Department of Transportation revealed that 40% of the industries in the US would need almost 3 months to recover from a week of transport disruption. A well managed supply chain can avoid this unforeseeable circumstance. By diversifying a supply chain can become more flexible. During times of crisis businesses can adopt different models to ensure they don’t get hit as hard.

Better Customer Satisfaction

When customers get their products on time in good condition they want to take the service more often. Reliability improves the trust of customers in a business. Growth in industry and economy is seen when expectations of customers are met. Almost 45% of businesses have visibility issues with their supply chain. By making the whole process more transparent customers will put more trust in the whole process which will lead to more business.

A modern business can not operate without proper supply chain management. Businesses without supply chain management are prone to frequent disruption which will lead to losses. An efficient supply chain management can keep the flow of goods at a good pace, contributing to the growth of the economy. By adopting a proper model of supply chain management and understanding the implications, businesses can achieve excellence by providing the best services to the customers.