Supply chain management can be explained as managing the flow of goods and services between businesses and locations. It includes a wide range of activities like end-to-end order fulfilment from the point of origin to consumption. It also entails the movement and storage of raw materials, work in progress inventory, and finished goods.
Supply chain management plays a crucial role for all businesses that have to serve goods to consumers physically. It helps streamline and optimize the supply-side activities to maximize customer satisfaction. Some of the most prominent logistics and supply chain management functions include the following.
Why Supply Chain Management Plays a Key Role in the Success of a Business?
Supply chain management plays a key role for businesses in the contemporary world. At the core of supply chain management, you will find these five crucial functions that help companies deliver an exceptional customer experience.
Purchasing is included in the primary functions of the supply chain management process. The manufacturing process requires raw materials to produce the final output that is sold to the end consumer. The raw materials must be procured and delivered on time at the right place. This helps to initiate the production function on time.
Coordinating with suitable suppliers and delivery firms is essential to avoid any unnecessary delays. The entire supply chain process is interlinked, and any delays in purchasing and procurement of raw materials can lead to further delays in the whole process.
Purchasing raw materials requires meticulous demand planning and forecasting of the expected demand from the customers. Forecasting the demand for goods in the market helps avoid situations like oversupply or supply shortages that might result in a loss for the companies.
Demand planning was accurate. Having too much inventory will tie up resources that could be used elsewhere. In case of too little inventory, businesses will miss out on revenues that could generate. Demand planning should be integrated with production, inventory management, production, and shipping to avoid mistakes.
Logistics is among the most critical supply chain functions that require precise coordination. After manufacturing, the products require storage space before they are finally shipped out for delivery. Local warehouses are needed to facilitate this storage space. Now to deliver the products to their destination, an effective transportation system is necessary. After the products are transported, an outstation warehouse storage space is needed to store the goods before they are out for delivery to the final consumers.
The supply chain logistics functions ensure that goods reach the final delivery station without any interruptions in the process. Proper documentation of every detail is significant to avoid any hassles. The absence of appropriate documentation can lead to complications at both exporting and importing ports.
In addition to this, there can be complications during local transportation as well. Vehicles can get stuck in the route due to traffic congestion or defects in the cars. A supply chain manager must ensure that everything goes smoothly and alternatives are available in unexpected complications.
- Resource Management
Every organization engaged in producing and selling goods requires raw materials, technology, time, and other resources. The resource management team helps to ensure that these resources are effectively managed. They enable the resources in the proper process at the required time to avoid unnecessary delays. This also helps to optimize resource allocation.
Resource allocation is not just about raw materials but also entails effectively allocating people to do various jobs and optimize their overall productivity. The workforce is required to move the goods seamlessly and ensure that the orders are correctly executed.
- Information Workflow
Information workflow plays a crucial role in the smooth functioning of warehousing and logistics businesses. It is an integral part of supply chain management that ensures that other functions are carried out uninterruptedly. Poor communication can result in less-than-optimal information workflow, disrupting the whole process and breaking the entire chain. The flow of relevant data without any hindrance is what makes for a smooth information workflow.
Regular exchange of crucial information is needed between external and internal entities in the process. The downstream information can include details of orders in hand, demand forecast, and market trends data. It helps to ensure that sufficient inventory is available to entertain all orders. Companies also have to arrange for another necessary resource, including financing, based on the information at hand.
Effective supply chain management is needed to ensure that resources are judiciously utilized, and goods are moved seamlessly between production and final delivery.
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