Why IT is IMPORTANT FOR BUSINESSES TO MANAGE THEIR Supply Chain?
For many businesses, the health and resilience of its supply chain is among the most important concerns. For Singapore and Singapore based companies, a secure and resilient logistics and supply chain management hub is also key to staying relevant in the global trade.
So, what happens if a business fails to manage their supply chain?
Anecdotally, the business will fail to deliver its goods, and not meet customers’ expectation. By not managing its suppliers and inventories, there will be low efficiency and poor control. This eventually translates to higher direct and indirect costs. The business suffers because of poor market performance and declining profitability.
As this persists on, the business fails to be competitive and would soon find itself made extinct by their competitors in the market.
How does Poor Supply Chain Management Affect Your Bottom Line?
Without an oversight and control of the Supply Chain, businesses would fail to address both direct and indirect costs. Typical hidden costs include:
1) Overhead costs in managing suppliers
2) Costs associated with quality and reliability
3) Poor cash flow due to high inventories
4) Excess inventories due to poor planning
5) Costs due to inefficiencies in logistics
6) Lost of sales due to unmet demand
7) Long component lead times
What is the Role of Supply Chain Management?
Going back to the fundamentals of commerce, a business exists simply because it is able to deliver a product or service that has a demand in the market.
In order to do this, businesses have to source, assemble, package, distribute, store, transport and,
deliver the Right product,
at the Right quantity,
to the Right place,
for the RIGHT cost.
This chain of activities, or supply chain, is the critical backbone of the business.
The Key Word in Supply Chain Management
The key word is INVENTORY. A healthy business with goods sold quickly has high inventory turnover, signifying a strong demand for its goods. Conversely, businesses with low inventory turnover, holds goods in its supply chain much longer than it should. Needless to say, Inventory Visibility and Inventory Control are very critical elements in any operations. These are major cost drivers and have direct impact on the bottom lines.
Why do Businesses Hold Inventories?
In order to meet the demand for its goods, inventories are held inevitably at various modes in the supply chain. This could be unfinished goods at the factory, or finished goods held in the warehouse, distribution centers by third parties, in the transportation pipeline or the fulfilment centres. Businesses that have poor visibility of its inventory level, face a higher risk of poor inventory health across their supply chain.
The revenue stream or financial health of the business depends on the supply chain functioning smoothly, and any glitch that disrupts the movement of the goods will result in unfulfilled orders.
The eCommerce Effect
With the explosion of eCommerce in 2020 and 2021, consumers no longer expects, but demand, to receive their orders sooner than ever before. As customer raises their expectations, suppliers are under greater pressure to build a responsive supply chain.
The pandemic and eCommerce explosion have revolutionised the way that supply chain professionals must work to manage supply chain and ensure orders are processed and fulfilled. Businesses have to reflect on how they can put in place processes and infrastructure to make “same day” delivery, and instead of handling bulk orders, be able to deliver smaller orders with fast turn-around times.
Businesses that fail to adapt will soon become irrelevant.
6 Reasons to Manage your supply chains
All the stakeholders from the producer, manufacturer, stockist, supplier, to the consumer are the main actors in the supply chain eco-system. They are interconnected and constantly ought to be in communication with each other for a product to reach into the hands of the customers.
The 6 most important reasons for supply chain management are:
Integrated & Co-operative Logistics
Effective supply chain meets the needs of both producers and consumers and takes an integrated & holistic approach towards management. If operations across different geographies are smooth and communicating in synergy, this only makes supply chains all the more efficient. This facilitates the logistics to easily manage every part of an integrated supply chain.
Improving vital areas of the supply chain will help reduce the overall operating costs. Businesses can minimize purchasing expenses and high inventory costs by expediting the delivery of the right inventory level at the right time to your warehouse. This helps avoid material shortages, which otherwise can delay production and waste precious financial resources. Consequently, an efficient supply chain helps minimize delays, which is crucial for maintaining financial efficiency and efficacy.
Enhance Customer Experience
A strong and sustainable business has a resilient supply chain. It will be capable of delivering the goods of the right quality in a timely manner and at the right price.
More and more consumers want to obtain the goods to be delivered to their doorsteps. An effective supply chain management will provide direct improvement to the consumer service experience.
Better Prepared for Disruptions
Supply Chain Management streamlines the flow of everything from goods to any unexpected natural disaster. Supply chain professionals can easily diagnose problems/disruptions for seamless movement of goods, thereby managing the risks of the business.
Improved Visibility for Supply Chain Operation
Visibility across the supply chain has a far-reaching impact on the success of a business. Lack of synchronization in workflow often ensues when the workforce in an organization cannot comprehend the ongoing activities a level below or above their own position in the supply chain. With supply chain management in place, visibility & transparency across every stage of the supply chain is increased.
Develop a Productive Work Environment
Implementing automation and integrating the best practices in your industry will improve your supply chain. This will optimize handling, storing, and picking times for all goods, and will significantly minimize the risk of error in the warehouse, and beyond. Thereby, it will effectively vitalize the overall quality of life of the workforce within the warehouse and in turn, improve the bottom line of your business significantly.
Managing your supply chain is managing your business
Managing supply chain is managing your business. An efficient supply chain can give a business the edge that it needs. Managing your supply chain is to focus on streamlining everything from product flow to managing the unexpected disruptions, ensuring a steady revenue stream.
We have also seen recent pandemic and eCommerce trends disrupting businesses and, in turn, how businesses are pivoting their business models, operations and supply chain for the new economy.
Evidently, businesses need to respond to the current VUCA climate by better managing their supply chain and to put in place a strategic plan to build an agile and resilient supply chain.