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3 Benefits of a Formal Supply Chain Management System

A formal supply chain management system is critical to the success of any organization as it impacts several aspects of the organization’s overall performance. 

Key areas where formal supply chain management impacts an organization’s performance include cost reduction, enhanced customer service, and risk mitigation.  

Cost Reduction

We know organizations can improve their profitability and competitiveness in the marketplace by reducing costs. Beyond looking for direct savings on line-item expenses, focusing on more effective supply chain management brings the benefit of savings in other ways that indirectly impact the bottom line. 

  • Improved inventory management: Optimizing inventory levels can minimize the costs of holding too much inventory, which ties up capital. Simultaneously, properly managed inventory can avoid the costs associated with lost sales or expedited shipping.  
  • Streamlined processes: When processes can be improved to facilitate on-time delivery, reduce cycle times, eliminate waste or redundancy, and provide faster lead times, costs can be reduced.  
  • Strategic sourcing: There are tangible costs associated with poor quality, unreliable suppliers, and the volatility inherent in today’s global economic situations. Effective supply chain management can help identify and select the most appropriate suppliers based on quality, reliability, and price.  
  • Collaboration and coordination: Building stronger relationships and communication channels with suppliers can also help reduce costs associated with miscommunication, redundant activities, and rework.  
  • Transportation management: Efficient transportation management can reduce the time and cost required to move goods.  
  • Targeted use of technology: Through leveraging technology and automation, supply chain management can contribute to alternatives that streamline processes, reduce errors, and increase speed – all of which impact costs.

Enhanced Customer Service

Better customer service relies on improving customer satisfaction and maintaining loyalty. Supply chain management can help organizations improve their service by ensuring that products are delivered on time and in the proper condition. 

  • Product quality: Ensuring high-quality products begins with selecting suitable suppliers and monitoring quality throughout production using a Supplier Performance Scorecard.   
  • Faster order fulfillment: When supply chain management contributes to reduced lead times and improved on-time delivery, orders are quickly fulfilled.  
  • Accurate and timely information: Effective supply chain management improves the availability of real-time data regarding inventory levels and delivery times. Providing a more precise order status facilitates customer expectations and avoids the disappointment that comes with surprise delays.

Risk Mitigation

Supply Chain Risk Management (SCRM) is the process of identifying risks, assessing them, and mitigating their effects on an organization’s supply chain. A complete SCRM plan covers every aspect of the process, including production, packaging, handling, storage, and transport.

Proper supply chain management can mitigate risk in several ways:

  • Supplier selection and evaluation: Risks of supplier disruption or quality issues can be minimized through careful selection and monitoring of suppliers on an ongoing basis.
  • Inventory management: In addition to minimizing costs, maintaining the right inventory level can help mitigate the risks associated with low stock, such as lost sales or dissatisfied customers. Conversely, excess inventory increases the risk of damage or obsolescence while tying up capital.  
  • Contingency planning: Effective supply chain management involves developing contingency plans to address potential disruptions or emergencies. Potential disruption sources include natural disasters, worldwide political events, and material shortages. 
  • Data analytics: With proper process management comes data collection. Through data analytics, supply chain risks can be monitored and more quickly responded to, helping to mitigate the impact. 

Improving supply chain management is a collaborative process 

Thurman Co. is uniquely positioned to assist organizations in various aspects of Supplier Management, including identifying opportunities to incorporate Supplier Management best practices.

We help businesses manage projects to significantly impact their success and growth. When you’re ready to put your project in the hands of a trusted professional organization, contact us to learn more about working together.

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