It primarily includes the active streamlining of the supply side activities of a business in order to increase the customer value and gain a competitive benefit within the marketplace. An effort is represented by the supplier to develop and execute supply chain which is as economical and efficient as possible. Everything from product development to production and also the information system which is required to direct these undertaking is included in supply chains. Basically, SCM attempts to centrally associate or control the distribution, shipment and production of a product. With the efficient management of the supply chain, organisations are able to minimize the costs and offer products to the consumer in a faster manner. Moreover, it is carried out with the tighter control of internal inventories, sales, distribution, internal production and the inventories of company vendors.
Importance of supply chain management
It has been analysed that supply chain management is considered as an integral part of most of the businesses and also important for the company to achieve its goals and customers’ satisfaction.
- Boost Customer service: It increases the customer service efficiently by increasing the expectations of the customer for the delivery of an appropriate product. The customers also expect the products to be available in most of the locations as it can be easy for them to efficiently receive the product without any inconvenience.
- Reduce Operating Costs: SCM also minimizes the operating costs by decreasing the purchasing and production cost. Mainly, the retailers depend on the supply chains for delivering expensive products efficiently to avoid holding costly inventories in the stores longer than necessary. Manufacturers depend on the supply chain to reliably deliver the materials to assembly plants for preventing material shortages which would shut down production. In these cases, SCM minimizes the operational costs in an effective manner.
- Improve financial position: It increases profit leverage and cash flow along with decreasing the fixed assets such as transportation of vehicles, warehouse, and plants in the supply chain. SCM helps to control and minimize the cost of supply chain which leads to an increase in firm profits. When the experts of supply chain can redesign the network to appropriately serve the customers of the U.S. from six warehouses instead of ten, then the firm will avoid building very costly buildings.
Along with this, SCM also plays a very important role socially. Moreover, it helps to sustain human life, improves human healthcare and also protects human from climate extremes.: