6 Benefits of Supply Chain Management
Effective supply chain management is critical for efficient warehouse operations. Supply chain managers need to learn from historical errors or victories, effectively plan for the future, and proactively address concerns before they arise. This forward-thinking approach is accomplished through a supply chain management process. Here’s an overview of supply chain management and the key benefits of successful implementation.
What is Supply Chain Management?
Supply chain management is a business-focused approach to managing an organization’s product from start to finish in the most efficient and transparent way. Raw materials are converted into finished goods and delivered to clients quickly and efficiently.
The overall objective of supply chain management is satisfying both customers and stakeholders simultaneously. This means an effective supply chain management process delivers goods to customers in a timely and efficient manner while also generating a profit for the company.
The five steps of supply chain management include:
- Designing: Determining what the process will look like, what the goals are, and what tools and technologies are needed to streamline the process.
- Planning: Figuring out how to implement the strategy given the facility’s constraints, how much it will cost, and what the return on investment (ROI) will be.
- Executing: Implementing the process from start to finish by establishing supply chain partners and vendors, managing inventory, and optimizing distribution.
- Controlling: Ensuring everything operates smoothly and consistently, and inventory levels remain steady.
- Monitoring: Setting and measuring key performance indicators (KPIs), and ensuring the operations’ performance aligns with the company’s objectives.
Facilities that excel in these steps provide their organization a high net value and ROI. These practices are also conducive to the development of an infrastructure that wards off competitors, leverages best of breed logistics practices and material handling technologies, and synchronizes the supply chain while measuring performance levels and KPIs.
6 Benefits of Effective Supply Chain Management
Supply chain management helps companies manage the flow of goods from start to finish. As such, the term is incredibly broad and encompasses a wide range of operations. The benefits of supply chain management are similarly extensive. However, here are six positive outcomes of effective supply chain management.
1. Increased Customer Satisfaction
Customer satisfaction is one of a facility’s primary objectives, particularly in ecommerce. Supply chain management plays a key role in customer satisfaction, ensuring companies are able to fulfill promises to customers and deliver products in a timely manner. If a finished product isn’t delivered within two days of the promised date, 69% of consumers say they’re much less likely to shop with that company in the future.
The COVID-19 pandemic has disrupted supply chain operations for many organizations, but only 21% of consumers are willing to forgive companies for pandemic-related delivery challenges. This means that effective supply chain management is a hot button topic when it comes to customer satisfaction.
Supply chain management is also critical to improve total order cycle time, which is the amount of time between an order being placed and when it’s delivered to a customer. While a streamlined supply chain process can improve your total order cycle time, an inefficient process can harm it—damaging customer satisfaction and retention.
2. Effective Inventory Management
Inventory management is critical for warehouse operations to run smoothly. When done effectively, inventory tracking can improve inventory accuracy and inventory visibility. This has several benefits, including:
- Preventing orders from shipping late: Approximately 34% of businesses have had to ship an order late because they didn’t realize it wasn’t in stock. Inventory visibility helps prevent this type of error from occurring and is a vital component of supply chain management.
- Reducing total order cycle time: Without effectively managed inventory levels, delivery times of placed orders will suffer. Supply chain management helps improve throughput time and gets products to customers quickly.
- Improving predictability: The ability to predict how much inventory is needed in the future, based on historical patterns and seasonality, is critical to ensuring a positive customer experience. Predicting an organization’s peaks and valleys is a key part of the supply chain management process, and helps to determine when to bulk up inventory in response to increased customer demand.
Effective supply chain leaders will prioritize inventory management in their supply chain activities to mitigate potential risks of late shipping and increase customer retention. This gives them a competitive edge over facilities that struggle with inventory accuracy.
3. Improved Quality Control
Quality control is an incredibly important part of supply chain management. Supply chain professionals should incorporate regular audits of their vendors and raw materials into their supply chain management process to ensure a consistent level of product quality. This benefits both the facilities and their vendors because it can alert them to potential areas of improvement, allowing them to correct their mistakes before making them with other facilities.
4. Lower Costs
While overhead and operating costs are an unavoidable part of operating a business, it’s the objective of supply chain professionals to lower costs and increase returns. Without effective supply chain management, your facility will experience an increase in costs. Ensuring the product management process goes smoothly from start to finish is essential to reducing your spending and maximizing your profits.
5. Optimized Distribution
Distribution is one of the most important facets of supply chain management. Organizations that excel in distribution increase profitability of their operations by leveraging “best of breed” logistics practices and proper material handling technologies for their facilities.
6. Improved Labor Optimization
Labor is one of the most pressing concerns for modern warehouses. The number of available jobs is at a record high, with more people leaving the warehousing industry than entering it. Furthermore, 71% of facilities typically take more than a month to adequately train new workers. It’s more urgent than ever for distribution centers to find solutions to their top labor consuming applications.
One of the primary advantages of supply chain management is the ability to incorporate automation into the process. It helps determine when automation is appropriate, and how much is necessary for a facility.
How a WES Can Optimize Your Supply Chain
A Warehouse Management System (WMS) is a critical tool for most warehouses, but has several limitations. It’s difficult, risky, and expensive to try and customize. It also tends to be insufficient in addressing all the facility’s needs. A Warehouse Execution System (WES) can augment your WMS, allowing for a higher degree of customization that accomplishes many tasks the Warehouse Control Systems (WCS) and WMS software can’t.
While a WMS is effective at supply chain integration, the addition of WES can optimize your labor and equipment to achieve peak performance from both.
The Importance of RightFIT Order Fulfillment to the Supply Chain
Every business, and distribution center, is different. Therefore, not every tool and technique will work the same for every facility. For this reason, it’s important to ensure the solution is the RightFIT for the problem.
If you’re interested in learning more about how to take a holistic approach to order fulfillment, schedule a consultation with us. In doing so, you’ll be able to speak with one of our experts and learn how to find the solution that makes the most sense for your operations.