The Importance of Supply Chain Management

pselleh's picture

Short Description: 

The Importance of Supply Chain Management

A well-developed supply chain is a vital component of any business. Supply chain management defines a system that involves the creation, production, and delivery of products and services to customers. A supply chain deals with raw components or supplies that the business needs to create a product or service. Business owners need parts, components, tools and equipment to aid in product development or services offered to customers. Without these resources, your business could not function. 

 Supply Chain Basics 

 Supply chain management relies on planning resource flow, determining necessary resources, and dealing with manufacturing issues. A supply chain deals with the production or delivery of goods from raw materials to the finished product. A supply chain consists of many different people and locations, including but not limited to suppliers, manufacturing and distribution centers, warehouses, and retail outlets. Supply chain management means effectively integrating all of these variables and ensuring delivery of products or services to the correct destinations and customers. 

 Importance of Supply Chain Management 

 Supply chain management must focus on the needs of your customers. Each link in your supply chain provides a valuable service. Business owners need to plan and strategize in order to create the efficient linking of these components, services, or parts. This allows the business owner to deliver products to customers as cost-effectively and quickly as possible. One of the most important supply chain components is the creation of a development chain. The development chain is defined as any type of activity associated with the implementation or introduction of a product or service to your customers. 

During this stage, business owners determine what can be manufactured within their business environment and what needs to be supplied, manufactured, or purchased from outside suppliers.  It is important for business owners to continually adapt their supply chain management strategies based on current trends and customer demand. A number of factors determine such strategies, including customer purchase trends, pricing strategies, season changes, and advertising.  

Matching supplies to customer demand can be challenging for any business owner. Shortages of raw goods, increases or decreases in orders, and changing buying trends all challenge supply-chain systems regardless of the business or industry.  Business owners can get around this by keeping a finger on the pulse of their business. 

Trends, customer purchase habits, and customer demand for specific products, goods, and services help managers reduce risk of financial loss or waste. When one link of a supply chain is damaged, broken, or defective, the entire supply chain may be affected. Developing a supply chain is a time-consuming and often complex endeavor yet offers great rewards. Business owners should learn a variety of methods of maintaining supply chain consistency.  

Business owners can do this through open communication with suppliers. Business owners must also build contingency plans into the supply chain. That way, if one link fails because of unforeseeable events, there is a "Plan B" in place. Such flexibility allows business owners to deal with continually changing trends in supply and demand and focuses on offering customers what they need when they need it.

You can learn more in the LeadersBench curriculum.