What Are The Benefits Of Supply Chain Management?

Supply Chain Management

Many people might wonder what the benefits of supply chain management are. Is it something that I should really look at for my company?

There are many benefits to supply chain management. The benefits of supply chain management include teamwork and collaboration, improved quality control, better efficiency and effectiveness, on-time deliveries, maximization of overhead costs, improved cash flow, risk mitigation, and shipping optimization. All of these areas are greatly helped by proper supply chain management.

Team Work Collaboration

Information and collaboration is a challenge for many companies. Many companies lack an automatic flow of information across the entire supply chain or have very fragmented information.

Yet collaboration is crucial for all types of business and especially for the supply chain. This is because if there’s a bottleneck in one part of the supply chain, it can affect the entire supply chain.

Collaboration can be improved by utilizing data and computer programs properly and having people have the information they need to make informed decisions.

At Mondoro, we love to use the Trello app. One reason why we like Trello is that it is very visual, and it allows us to be able to see the products on one page. We find it helps our overall company collaboration.

Improved Quality Control

Proper supply chain management can help improve your quality control. A Six Sigma rule of the least cost and least quality issues possible are fundamental in the supply chain management,

In a CIO review,Opens in a new tab. Arshad Hafeez talks about the rule of 10. The rule of 10 is the cost of replacing or fixing anything increases 10 times at each step of the progression of the product.

If an item was $10 FOB and is shipped and there is a problem, then to fix the problem would cost $100 at the next level. If the problem continues to the next level, it will cost USD 1,000 (10 x $100).

In my experience, 10 is quite a large number from a $10 item to go up to $1000, but it does show it is always best to fix a problem at the lowest level. This is where it is easiest and costs the least to fix a problem.

At Mondoro, we look at a percent of our overall quality for our shipments. In other words, we would like to see that everything is under a 1% complaint rate. Most of our item’s overall complaint rate is under 1% or much closer to 0.2 or 0.1%.

Better Efficiency And Effectiveness

Proper Supply chain management should help to build efficiency within your entire organization. Efficiency is your business standard of performance or, in other words, is the amount of work performed in a certain process and whether that process can utilize all the available resources.

Efficiency is important, but it does not always guarantee that you’re going to be effective. To really drive efficiency, you must also have effectiveness.

In other words, someone could try to do something in the least amount of time possible, but at the same time, if it is filled with errors, it is not effective. So you really need to have both efficiency and effectiveness In your supply chain.

A supply chain that is properly managed should also look at the efficiency and effectiveness of the overall supply chain. And if you see areas that are not efficient or not effective, then changes should be made to improve this.

I have spent a lot of time explaining this to my staff here in Asia. Since in Asia, they do not always look at efficiency and effectiveness. In other words, they may do something they think is efficient, but it may not be the most effective. It can be hard sometimes to break old habits, but it’s also important that we all do this to become the most efficient and effective as possible.

On-time Deliveries

One important principle in proper supply chain management is on-time deliveries. This is especially true that if you are going to increases in production or business. Delays can hurt or kill a business.

Customers want on-time deliveries. It is imperative that anyone that is in the supply chain look at on-time deliveries. One of the best ways to do this is to have a supply chain that is properly managed.

Maximizes Overhead Costs

Proper supply chain management helps to maximize the overall cost of an operation. In other words, it can cost about as much to produce 100 pieces of an item as it does to produce 1000 pieces.

This is because a lot of times, once a production line is set up to produce an item, it is much easier for the workers to keep going with that specific item in production. This is why many factories build their entire manufacturing process on producing only large quantities.

Another way to do this is by making sure that your supply chain is the most efficient and effective as possible. This will also be able to help you to be able to maximize your overhead cost.

Improves Cash Flow

Cash flow in any organization is important. But a proper supply chain management should also be able to help you to maximize and to improve your cash flow to be the most effective possible. To do this, you need to make sure that there is no waste within your supply chain.

Risk Mitigation

Proper supply chain management also helps to mitigate risk. The reason is that if you have a well-tuned supply chain, it will help all the other aspects of your business operations.

Every company needs to mitigate risk, especially during uncertainty; you must mitigate your risk as much as possible. There are so many things that can happen within any business operation, so mitigating the risk is important.

Optimizes Shipping

Shipping costs continue to rise. As shipping costs continue to rise, everything to do with shipping must be optimized. This is from how the container is loaded to picking the most cost-effective route and shipping rate possible.

An effective supply chain can help you be able to do all of these things. The manufacturing supplier will ensure that the container is loaded as full as possible not to waste space or damage the product. The shipper will ensure that they are using the best route possible.

Conclusion

Proper supply chain management can help the entire business operation. This is why supply chain management is such an essential part of any business operation. There are many benefits to having proper supply chain management in place.

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Anita Hummel

Hi, I am Anita Hummel. I am the President of Mondoro. I am passionate about helping you CREATE, DEVELOP, and MANUFACTURE home decor and home furnishing products. I am also an avid blogger with a love of travel and riding my motorcycle around the streets of Hanoi, Vietnam.

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