Supply chain management produces benefits such as new efficiencies, higher profits, lower costs and increased collaboration. SCM enables companies to better manage demand, carry the right amount of inventory, deal with disruptions, keep costs to a minimum and meet customer demand in the most effective way possible. These SCM benefits are achieved through the appropriate strategies and software to help manage the growing complexity of today's supply chains.
Importance of supply chain management
The impact of benefits, such as those discussed above, are what make SCM important to both the enterprise and consumer.
SCM activities can improve customer service. Effective supply chain management has the ability to ensure customer satisfaction by making certain the necessary products are available at the correct location at the right time.
SCM can increase customer satisfaction by delivering products to consumers on time and providing fast service and support whenever needed. By increasing customer satisfaction levels, enterprises are able to build and improve customer loyalty, making the boost in customer service important for both the customer and business.
The SCM activities
It can reduce purchasing cost, production cost and total supply chain cost. By lessening operating costs, SCM is also able improve a company's financial position. The reduced supply chain costs can greatly increase a business's profits and cash flow.
Furthermore, SCM can diminish the use of large fixed assets -- such as warehouses and transportation vehicles -- by allowing supply chain experts to redesign their network in order to properly serve and operate with five warehouses instead of eight, reducing the cost of owning an additional three facilities.
SCM can help ensure human survival by improving healthcare, protecting humans from climate extremes and sustaining human life.
The supply chain is also vital to the delivery of electricity to homes and businesses, providing the energy needed for light, heat, air conditioning and refrigeration.
Supply chain complexity
The most basic version of a supply chain includes a company, its suppliers and the customers of that company. The chain could look like this: raw material producer, manufacturer, distributor, retailer and retail customer
A more complex, or extended, supply chain will likely include a number of suppliers and suppliers' suppliers, a number of customers and customers' customers -- or final customers -- and all the organizations that offer the services required to effectively get products to customers, including third-party logistics providers, financial organizations, supply chain software vendors and marketing research providers. These entities also use services from other providers.