Supply Chain Management - Key to Business Success

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Our house is full of finished goods and items, fit for end-user consumption. Have you ever wondered about the story behind that product? As consumers, in most cases, our exposure is limited to the finished goods only. 

There is a long journey behind any final product and the supply chain is the link that makes that journey possible.

Supply chain refers to the route through which the raw materials reach the producers to be converted into finished goods and the finished goods reach the consumer. 

This is a two-way interactive system i.e. it can be used by the customer as well, to return the product procured from the buyer in situations like Technical glitch, etc. Managing the supply chain using the resources, employees, technologies, and departments are known as supply chain management.

Components of Supply Chain Management

1. Planning – Before commencing any activity it is necessary to lay a basic framework on which that entire activity will be based. The first step in supply chain planning involves assessment of the supply and demand of the product or service for which the supply chain is being considered. 

Checking the requirements regarding manpower, Finance, and Profit is also an important part of this process. Finally, on the basis of the entire analysis, a relevant plan is formulated, which is further implemented as a strategy.

2. Source - Many refer to this process as sourcing. To make a finished product smooth inflow of raw material is necessary and sourcing ensures that. The procurement of any material from outside the organization comes under sourcing. 

According to the nature of the product to be produced, the sources of procurement of necessary items are determined in a way, which enables us to ensure maximum quality and minimum cost.

3. Production – Production is the most important part of this entire process. In this stage, all the raw materials that are procured in the sourcing process are assembled and converted into finished goods. The main objective of this process is assembling, packaging, and testing of the finished product.

4. Warehouse and Delivery – After the goods are produced, with the help of logistics and transportation resources, they are sent to the customer for consumption, this process is called Delivery.

In many cases, the producer may encounter a situation in which there is no immediate demand for the product. In that case, the product must be stored safely so that it can be sold in the future. This process of storing the produced items is called warehousing.

5. Return – The supply chain is a two-way interactive system and transportation of goods from both the ends, to and fro, is possible. Due to many reasons, manufacturing defect being one of them, the manufacturer might have to take back the delivered goods. This process is called a return. In this, the supply chain starts working in the opposite direction i.e. consumer to manufacturer.

Why is an effective and efficient supply chain important for your business?

• Decreases overall costs – A well-managed supply chain decreases overall costs in many ways a smooth movement of goods means low holding costs and timely delivery of raw materials to the production facility results in inefficient functioning and fewer shutdowns. All of these factors ultimately result in a significant decrease in the overall cost.

• Increases profit – By maintaining a smooth channel between the customer and the producers, Supply Chain ensures that goods are available at the right place at the right time. It ensures the proper availability of the goods which results in healthy sales. 

• This also helps in increasing cash flow in the organization. Efficiency that is achieved by the supply chain management help in increasing the Profit leverage.

• Improved customer satisfaction – A well-functioning supply chain is essential for maximum customer satisfaction. The timely delivery of required goods and services adds to customer satisfaction.

• The return function of supply chain management is the most important part of customer satisfaction and overall customer experience. Its importance increases, even more, when the seller is not accessible physically like in the case of the online retailer. 

• The assurance that the ordered goodwill reaches within time and if there is any defect or dissatisfaction with the product then a presence of robust returning mechanism results in a highly satisfied customer. 

Written by- Chandan Kumar

Edited By - Dhiraj Kumar Agrawal