Origin of the term and definitions

In 1982, Keith Oliver, a consultant at Booz Allen Hamilton, introduced the term "supply chain
management" to the public domain in an interview for the Financial Times.In 1983 WirtschaftsWoche in
Germany published for the first time the results of an implemented and so called "Supply Chain
Management project", led by Wolfgang Partsch.

In the mid-1990s, the term "supply chain management" gained currency when a flurry of articles and
books came out on the subject. Supply chains were originally defined as encompassing all activities
associated with the flow and transformation of goods from raw materials through to the end user, as
well as the associated information flows. Supply-chain management was then further defined as the
integration of supply chain activities through improved supply-chain relationships to achieve a
competitive advantage.

In the late 1990s, "supply-chain management" (SCM) rose to prominence, and operations managers
began to use it in their titles with increasing regularity

What is Supply Chain Management?

Supply chain management refers to the management of operations that move the products through the
supply chain, i.e., from the supplier to the end consumer. All these processes make sure that products
arrive at the right time and in the right quantity to meet the customers' expectations. Any business
looking to maximize its profits should have a well-managed supply chain, and it's possible when you
make your strategy around the strategic goals of supply chain management.

Functions

Supply-chain management is a cross-functional approach that includes managing the movement of raw
materials into an organization, certain aspects of the internal processing of materials into finished goods,
and the movement of finished goods out of the organization and toward the end consumer. As
organizations strive to focus on core competencies and become more flexible, they reduce ownership of
raw materials sources and distribution channels. These functions are increasingly being outsourced to
other firms that can perform the activities better or more cost effectively. The effect is to increase the
number of organizations involved in satisfying customer demand, while reducing managerial control of
daily logistics operations. Less control and more supply-chain partners lead to the creation of the
concept of supply-chain management.[29] The purpose of supply-chain management is to improve trust
and collaboration among supply-chain partners, thus improving inventory visibility and the velocity of
inventory movement.[citation needed][30][31] In this section, we have to communicate with all the
vendors and suppliers, make some comparisons, and after that, we have to place the order.
What is supply chain management?

Supply chain management is the handling of the entire production flow of a good or service — starting
from the raw components all the way to delivering the final product to the consumer. A company creates
a network of suppliers (“links” in the chain) that move the product along from the suppliers of raw
materials to those organizations that deal directly with users.

supply chain management (SCM) deals with a system of procurement (purchasing raw
materials/components), operations management (ensuring the production of high-quality products at
high speed with good flexibility and low production cost), logistics and marketing channels, so that the
raw materials can be converted into a finished product and delivered to the end customer.

Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a
product. By managing the supply chain, companies can cut excess costs and deliver products to the
consumer faster. This is done by keeping tighter control of internal inventories, internal production,
distribution, sales, and the inventories of company vendors.

SCM is based on the idea that nearly every product that comes to market results from the efforts of
various organizations that make up a supply chain. Although supply chains have existed for ages, most
companies have only recently paid attention to them as a value-add to their operations.

Mission

Supply chain management, techniques with the aim of coordinating all parts of SC, from supplying raw
materials to delivering and/or resumption of products, tries to minimize total costs with respect to
existing conflicts among the chain partners. An example of these conflicts is the interrelation between
the sale department desiring to have higher inventory levels to fulfill demands and the warehouse for
which lower inventories are desired to reduce holding costs.

How does supply chain management work?

The supply chain manager tries to minimize shortages and keep costs down. The job is not only about
logistics and purchasing inventory. According to Salary.com, supply chain managers “oversee and
manage overall supply chain and logistic operations to maximize efficiency and minimize the cost of
organization's supply chain."

Productivity and efficiency improvements can go straight to the bottom line of a company. Good supply
chain management keeps companies out of the headlines and away from expensive recalls and lawsuits.
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which
consists of the following five parts.
Planning

Plan and manage all resources required to meet customer demand for a company’s product or service.
When the supply chain is established, determine metrics to measure whether the supply chain is
efficient, effective, delivers value to customers and meets company goals.

OR

To get the best results from SCM, the process usually begins with planning to match supply with
customer and manufacturing demands. Firms must predict what their future needs will be and act
accordingly. This relates to raw materials needed during each stage of manufacturing, equipment
capacity and limitations, and staffing needs along the SCM process. Large entities often rely on ERP
system modules to aggregate information and compile plans.

Sourcing

Choose suppliers to provide the goods and services needed to create the product. Then, establish
processes to monitor and manage supplier relationships. Key processes include: ordering, receiving,
managing inventory and authorizing supplier payments.

Efficient SCM processes rely very heavily on strong relationships with suppliers. Sourcing entails working
with vendors to supply the raw materials needed throughout the manufacturing process. A company
may be able to plan and work with a supplier to source goods in advance. However, different industries
will have different sourcing requirements. In general, SCM sourcing includes ensuring:

the raw materials meet the manufacturing specification needed for the production of goods.

the prices paid for the goods are in line with market expectations.

the vendor has the flexibility to deliver emergency materials due to unforeseen events.

the vendor has a proven record of delivering goods on time and in good quality.

Supply chain management is especially critical when manufacturers are working with perishable goods.
When sourcing goods, firms should be mindful of lead time and how well a supplier can comply with
those needs.

Making

Organize the activities required to accept raw materials, manufacture the product, test for quality,
package for shipping and schedule for delivery.
At the heart of the supply chain management process, the company transforms raw materials by using
machinery, labor, or other external forces to make something new. This final product is the ultimate goal
of the manufacturing process, though it is not the final stage of supply chain management.

The manufacturing process may be further divided into sub-tasks such as assembly, testing, inspection,
or packaging. During the manufacturing process, a firm must be mindful of waste or other controllable
factors that may cause deviations from original plans. For example, if a company is using more raw
materials than planned and sourced for due to a lack of employee training, the firm must rectify the
issue or revisit the earlier stages in SCM.

Delivering

Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive
payments.

Once products are made and sales are finalized, a company must get the products into the hands of its
customers. The distribution process is often seen as a brand image contributor, as up until this point, the
customer has not yet interacted with the product. In strong SCM processes, a company has robust
logistic capabilities and delivery channels to ensure timely, safe, and inexpensive delivery of products.

This includes having a backup or diversified distribution methods should one method of transportation
temporarily be unusable. For example, how might a company's delivery process be impacted by record
snowfall in distribution center areas?

Returning

Create a network or process to take back defective, excess or unwanted products.

The supply chain management process concludes with support for the product and customer returns. Its
bad enough that a customer needs to return a product, and its even worse if its due to an error on the
company's part. This return process is often called reverse logistics, and the company must ensure it has
the capabilities to receive returned products and correctly assign refunds for returns received. Whether
a company is performing a product recall or a customer is simply not satisfied with the product, the
transaction with the customer must be remedied.

Many consider customer returns as an interaction between the customer and the company. However, a
very important part of customer returns is the intercompany communication to identify defective
products, expired products, or non-conforming goods. Without addressing the underlying cause of a
customer return, the supply chain management process will have failed, and future returns will likely
persist.

Why Is Supply Chain Management Important?

Supply chain management is important because it can help achieve several business objectives. For
instance, controlling manufacturing processes can improve product quality, reducing the risk of recalls
and lawsuits while helping to build a strong consumer brand. At the same time, controls over shipping
procedures can improve customer service by avoiding costly shortages or periods of inventory
oversupply. Overall, supply chain management provides several opportunities for companies to improve
their profit margins and is especially important for companies with large and international operations.

Importance

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in
the global market and networked economy.[32] In Peter Drucker's (1998) new management paradigms,
this concept of business relationships extends beyond traditional enterprise boundaries and seeks to
organize entire business processes throughout a value chain of multiple companies.

In recent decades, globalization, outsourcing, and information technology have enabled many
organizations, such as Dell and Hewlett-Packard, to successfully operate collaborative supply networks in
which each specialized business partner focuses on only a few key strategic activities.[33] This inter-
organizational supply network can be acknowledged as a new form of organization. However, with the
complicated interactions among the players, the network structure fits neither "market" nor "hierarchy"
categories.[34] It is not clear what kind of performance impacts different supply-network structures
could have on firms, and little is known about the coordination conditions and trade-offs that may exist
among the players. From a systems perspective, a complex network structure can be decomposed into
individual component firms.[35] Traditionally, companies in a supply network concentrate on the inputs
and outputs of the processes, with little concern for the internal management working of other
individual players. Therefore, the choice of an internal management control structure is known to impact
local firm performance.[36]

In the 21st century, changes in the business environment have contributed to the development of
supply-chain networks. First, as an outcome of globalization and the proliferation of multinational
companies, joint ventures, strategic alliances, and business partnerships, significant success factors were
identified, complementing the earlier "just-in-time", lean manufacturing, and agile manufacturing
practices.[37][38][39][40] Second, technological changes, particularly the dramatic fall in communication
costs (a significant component of transaction costs), have led to changes in coordination among the
members of the supply chain network.[41]
Many researchers have recognized supply network structures as a new organizational form, using terms
such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and
"Next Generation Manufacturing System".[42][43][44] In general, such a structure can be defined as "a
group of semi-independent organizations, each with their capabilities, which collaborate in ever-
changing constellations to serve one or more markets in order to achieve some business goal specific to
that collaboration".[45]

The importance of supply chain management proved crucial in the 2019-2020 fight against the
coronavirus (COVID-19) pandemic that swept across the world.[46] During the pandemic period,
governments in countries which had in place effective domestic supply chain management had enough
medical supplies to support their needs and enough to donate their surplus to front-line health workers
in other jurisdictions.[47][48][49] The devastating COVID-19 crisis in US has turned many sectors of the
local economy upside down, including the country's storied logistics industry. Some organizations were
able to quickly develop foreign supply chains in order to import much needed medical supplies.[50][51]
[52]

Supply-chain management is also important for organizational learning. Firms with geographically more
extensive supply chains connecting diverse trading cliques tend to become more innovative and
productive.[53]

The security-management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and
related standards published jointly by the ISO and the IEC. Supply-Chain Management draws heavily
from the areas of operations management, logistics, procurement, and information technology, and
strives for an integrated approach.

Supply chain resilience

An important element of SCM is supply chain resilience, defined as "the capacity of a supply chain to
persist, adapt, or transform in the face of change".[54] For a long time, the interpretation of resilience in
the sense of engineering resilience (= robustness[55]) prevailed in supply chain management, leading to
the notion of persistence.[54] A popular implementation of this idea is given by measuring the time-to-
survive and the time-to-recover of the supply chain, allowing to identify weak points in the system.[56]

More recently, the interpretations of resilience in the sense of ecological resilience and social–ecological
resilience have led to the notions of adaptation and transformation, respectively.[54] A supply chain is
thus interpreted as a social-ecological system that – similar to an ecosystem (e.g. forest) – is able to
constantly adapt to external environmental conditions and – through the presence of social actors and
their ability to foresight – also to transform itself into a fundamentally new system.[57] This leads to a
panarchical interpretation of a supply chain, embedding it into a system of systems, allowing to analyze
the interactions of the supply chain with systems that operate at other levels (e.g. society, political
economy, planet Earth).[57]

For example, these three components of resilience can be discussed for the 2021 Suez Canal obstruction,
when a ship blocked the canal for several days. Persistence means to "bounce back"; in our example it is
about removing the ship as quickly as possible to allow "normal" operations. Adaptation means to
accept that the system has reached a "new normal" state and to act accordingly; here, this can be
implemented by redirecting ships around the African cape or use alternative modes of transport. Finally,
transformation means to question the assumptions of globalization, outsourcing and linear supply chains
and to envision alternatives; in this example this could lead to local and circular supply chains that do not
need global transportation routes any longer.

Historical developments

Six major movements can be observed in the evolution of supply-chain management studies: creation,
integration, globalization,[58] specialization phases one and two, and SCM 2.0.

Creation era

The term "supply chain management" was first coined by Keith Oliver in 1982. However, the concept of a
supply chain in management was of great importance long before, in the early 20th century, especially
with the creation of the assembly line. The characteristics of this era of supply-chain management
include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs,
and widespread attention to Japanese management practices. However, the term became widely
adopted after the publication of the seminal book Introduction to Supply Chain Management in 1999 by
Robert B. Handfield and Ernest L. Nichols, Jr.,[59] which published over 25,000 copies and was translated
into Japanese, Korean, Chinese, and Russian.[60]

Integration era

This era of supply-chain-management studies was highlighted with the development of electronic data
interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of
enterprise resource planning (ERP) systems. This era has continued to develop into the 21st century with
the expansion of Internet-based collaborative systems. This era of supply-chain evolution is characterized
by both increasing value-added and reducing costs through integration.[citation needed]

A supply chain can be classified as a stage 1, 2, or 3 network. In stage 1–type supply chain, systems such
as production, storage, distribution, and material control are not linked and are independent of each
other. In a stage 2 supply chain, these are integrated under one plan, and enterprise resource planning
(ERP) is enabled. A stage 3 supply chain is one that achieves vertical integration with upstream suppliers
and downstream customers. An example of this kind of supply chain is Tesco.[citation needed]

Globalization era

It is the third movement of supply-chain-management development, the globalization era, can be

characterized by the attention given to global systems of supplier relationships and the expansion of
supply chains beyond national boundaries and into other continents. Although the use of global sources
in organizations' supply chains can be traced back several decades (e.g., in the oil industry), it was not
until the late 1980s that a considerable number of organizations started to integrate global sources into
their core business.[citation needed] This era is characterized by the globalization of supply-chain
management in organizations with the goal of increasing their competitive advantage, adding value, and
reducing costs through global sourcing.[citation needed]

Specialization era (phase I): outsourced manufacturing and distribution

In the 1990s, companies began to focus on "core competencies" and specialization. They abandoned
vertical integration, sold off non-core operations, and outsourced those functions to other companies.
This changed management requirements, as the supply chain extended beyond the company walls and
management was distributed across specialized supply-chain partnerships.[citation needed]

This transition also refocused the fundamental perspectives of each organization. Original equipment
manufacturers (OEMs) became brand owners that required visibility deep into their supply base. They
had to control the entire supply chain from above, instead of from within. Contract manufacturers had to
manage bills of material with different part-numbering schemes from multiple OEMs and support
customer requests for work-in-process visibility and vendor-managed inventory (VMI).[citation needed]

The specialization model creates manufacturing and distribution networks composed of several
individual supply chains specific to producers, suppliers, and customers that work together to design,
manufacture, distribute, market, sell, and service a product. This set of partners may change according
to a given market, region, or channel, resulting in a proliferation of trading partner environments, each
with its own unique characteristics and demands.[citation needed]

Specialization era (phase II): supply-chain management as a service

Specialization within the supply chain began in the 1980s with the inception of transportation
brokerages, warehouse management (storage and inventory), and non-asset-based carriers, and has
matured beyond transportation and logistics into aspects of supply planning, collaboration, execution,
and performance management.
Market forces sometimes demand rapid changes from suppliers, logistics providers, locations, or
customers in their role as components of supply-chain networks. This variability has significant effects on
supply-chain infrastructure, from the foundation layers of establishing and managing electronic
communication between trading partners to more complex requirements such as the configuration of
processes and workflows that are essential to the management of the network itself.

Supply-chain specialization enables companies to improve their overall competencies in the same way
that outsourced manufacturing and distribution has done; it allows them to focus on their core
competencies and assemble networks of specific, best-in-class partners to contribute to the overall value
chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and
deploy this domain-specific supply-chain expertise without developing and maintaining an entirely
unique and complex competency in house is a leading reason why supply-chain specialization is gaining
popularity.

Outsourced technology hosting for supply-chain solutions debuted in the late 1990s and has taken root
primarily in transportation and collaboration categories. This has progressed from the application service
provider (ASP) model from roughly 1998 through 2003 to the on-demand model from approximately
2003 through 2006, to the software as a service (SaaS) model currently in focus today.

7 Key Objectives Of Supply Chain Management (SCM)

Supply Chain Management or SCM is the practice of managing the movement of products and services
across different processes and locations. It includes the storage and transportation of raw materials,
work-in-process inventory, finished items, and end-to-end order fulfilment from the point of origin to the
point of consumption.

SCM encompasses the planning, design, control, and execution of all business activities associated with a
company’s procurement, production, distribution, and sales order fulfilment functions. Thus, it involves
the administration of supply and demand, sourcing raw materials and components, manufacturing and
assembly, warehousing and inventory tracking, order processing and management, distribution across all
channels, and delivery to the final customer.

Supply chain managers are responsible for developing effective plans and strategies to ensure the supply
chain’s correct operation. They create well-defined action plans through extensive analysis and
forecasting, which result in improved performance throughout the enterprise.
The Supply Chain Management system is regarded to be the backbone of today’s commercial
organisations. Suppliers who adhere to SCM principles are expected to deliver significantly more value to
customers than those who have not implemented SCM concepts into their operations. The following are
the 7 most important objectives of Supply Chain Management.

1. Improving Efficiency

One of the most crucial objectives of Supply Chain Management is efficiency. Efficiency is synonymous
with waste minimisation. Waste can manifest itself in a number of ways, including wasted materials,
wasted money, wasted person-hours, wasted delivery time, and many other forms. Keeping waste to a
minimum is a critical component of Supply Chain Management.

How can SCM contribute to waste reduction? It tries to reduce waste by managing manufacturing,
inventory, transportation, and logistics. It does this by identifying opportunities to improve systems in
order to reduce waste. If, for example, your company shares inventory data with a supplier and keeps it
updated in real-time using ERP software, the company may replenish inventory promptly to meet buyers’
demand. The process of effectively managing these functions can be a difficult one to master, but
knowing how to do so can be extremely beneficial to your business’ overall success.

2. Improving Quality

Supply Chain Management is not solely concerned with waste reduction. Another key objective is to
ensure that the product is of the highest possible quality. Quality Assurance can be characterised as
adherence to various customer-specified quality attributes, ranging from performance to specific
features. This includes adhering to food safety regulations, demonstrating ethical and sustainable
practices, and other similar actions. It is critical to establish precise standards that involve supply
partners from the start. Being agile in managing change and variation to that specification in real-time is
essential to allow products to continue flowing across the supply chain. SCM has a direct impact on the
quality of a company’s products as well as its overall profitability. To achieve a competitive edge in the
market while simultaneously lowering operating expenses, quality management in the supply chain is
essential.

3. Optimising Transportation and Logistics

transportation

The optimisation of transportation and logistics is yet another vital goal of Supply Chain Management. In
an independent business environment, each company is responsible for its own role in ordering,
shipping, and transporting goods. Costs are relatively higher in this business strategy due to poor
scheduling and coordination. Supply Chain Management ensures that your processes flow smoothly and
that suppliers, manufacturers, wholesalers, and retailers are always on the same page. SCM enables you
to optimise transportation and logistics activities with any vendors or purchasers with whom you do
business. Orders are automatically entered into a system, which notifies other facilities that additional
resources are required to fulfil this request. This makes the entire process very smooth and seamless.

4. Reducing Costs

It is the goal of Supply Chain Management to reduce a company’s operating expenses. It lowers the cost
of all types of business expenses, such as the cost of purchasing, manufacturing, and delivering goods,
by establishing an optimised supply chain. It is possible to shorten the holding period of both raw
materials and finished items by allowing a smooth flow of raw materials between a supplier and a
company and the movement of finished goods between a company and its customers. This helps to
reduce losses and keep the overall cost of doing business as low as possible.

5. Enhancing Customer Satisfaction

customer services

One vital objective of SCM is to maximise customer satisfaction. Your supply chain is by far the most
effective means of customer service. It has a direct influence on the two most critical components of
client satisfaction: pricing and delivery. Having an efficient supply chain enables you to outperform your
competition in terms of retail pricing and profitability. Having high-performing operations also helps you
to meet or exceed your customers’ expectations for product delivery. Providing your customers with
what they want, when they want it, and at the lowest price possible is critical to maintaining their
satisfaction.

That is precisely what effective Supply Chain Management empowers you to do. By selecting the
appropriate systems, methodologies, and partners for your supply chain, you can provide the
exceptional service, transparency, and visibility that your customers demand. You maintain complete
control over the lifecycle of your products, from conception to delivery, by establishing systems that
minimise errors and maximise inventory efficiency. The more optimised your supply chain, the better the
customer experience, the happier your customers will be, and the more likely they will make another
purchase from you.

6. Improving Distribution

Businesses benefit from Supply Chain Management because it streamlines the distribution process. In
order to facilitate the speedier movement of goods, it is necessary to achieve proper coordination
between various transportation channels and warehouses. Supply Chain Management enables
businesses to reduce overhead costs while also delivering items more quickly. As a result, the entire
distribution system is improved, allowing for the delivery of products at the appropriate time and
location.
Hence, it is wise to invest in effective technology that allows you to manage inventory quickly, generate
thorough reports, automate delivery, provide real-time tracking, and perform other distribution
functions seamlessly.

7. Maintaining Better Coordination

distribution network

Supply Chain Management strives to improve coordination between the business’s various stakeholders.
A channel is established, allowing employees, customers, and suppliers to communicate with the
company efficiently. Managers can quickly direct their staff, and employees can communicate with their
supervisors via the established channel in the event of an emergency. Additionally, customers can obtain
necessary information via self-portals established as part of the customer support system. It facilitates
information sharing between all stakeholders and contributes to building an organisation with
exceptional coordination.

Conclusion

Supply Chain Management is a blend of art and science that focuses on how your business acquires the
raw materials necessary to build a product or service, manufactures that product or service, and delivers
it to customers. SCM’s primary goal is to keep a firm afloat and ultimately to drive it to success. Other
objectives of SCM include improving efficiency and quality, minimising costs, optimising delivery and
distribution and providing the best possible experience to your customers. Supply Chain Management is,
indeed, the backbone of any business.

Top Five Goals and Objectives of Supply Chain Management

The top five supply chain management goals include the following:

Ensure efficiency

Optimize and standardize logistics

Focus on improving quality

Increase flexibility

Monitor financial success

Ensure Efficiency

Efficiency is a fundamental aspect of supply chain management and refers to fulfilling orders timely by
using the least amount of inventory. While operational efficiency is necessary, efficiency between all the
links in the supply chain is also crucial. Therefore, manufacturers, wholesalers, and retailers must
collaborate to increase the efficiency of the operations.

Inventory, logistics, and transportation management can become complex if companies lack ERP, MRP,
and APS systems. For this reason, manufacturers should prioritize increasing visibility within their
operations and with their suppliers and retailers. In this way, you can achieve the goal of ensuring
efficiency in your supply chain management.

Optimize and Standardize Logistics

Another key goal of supply chain management is optimizing logistics. There are various ways to optimize
your logistics, and deploying modern technology is the best way to do it. Due to the advancements in
industrial-grade technology and cloud-based supply chain management software, you can easily
optimize and streamline logistics.

Products like PackageX Mailroom can help you achieve these supply chain management goals and
objectives. Its OCR-enabled software eliminates manual data entry as AI does all the work for you and
provides end-to-end tracking on all inbound and outbound deliveries. Using technologies like artificial
intelligence and machine learning, you can automate your logistics operations and increase the
productivity of your staff.

Focus on Improving Quality

quality management

The main goal of supply chain management is to manufacture products and deliver them to the end
consumers. However, providing the product is not the only goal; the quality of that product also matters.
You should provide consumers with a product that offers the best value possible. Therefore, focusing on
improving the quality of the product should be a shared goal between you and your supply chain
partners.

One way to improve the quality of the products is to collaborate with the customers to identify their
needs. They will highlight the inefficiencies in the product and provide you with an opportunity to
correct them. In this way, you can produce a product that will be of value to your customers.

Increase Flexibility
Supply chain management is all about adapting to change. As the current business environment is highly
volatile, supply chain management can help organizations adapt to the challenges of globalization,
changing consumer expectations, and economic instability.

The firms that fail to foresee the changes in their supply chain are destined to perish. Therefore,
businesses should aim to increase flexibility by creating adaptive operating models. It helps the
companies scale up or down their operations rapidly in response to sudden changes in demand. In
simple words, a responsive and flexible supply chain will react to changes with minimum disturbance.

Monitor Financial Success

Monitoring Financial Success

Contributing to the organization's financial performance and monitoring financial success are some of
the obvious goals of supply chain management. The traditional approaches revolved around cost-cutting
strategies focused on reorganizing stock levels to reduce labor, inventory carrying, and freight costs.

However, today firms are leveraging the supply chain to enhance sales and market penetration. Their key
objective is to increase the competitive advantage and shareholder profit. You can have an in-depth
understanding of the supply chain management's organizational value with a dual focus on cost-control
and revenue development. If a firm focuses on financial goals, it can evolve from day-to-day operations
to a strategic process managed by supply chain professionals.

The Bottom Line

You can get multitudes of benefits by incorporating supply chain management goals into your business.
It will decrease the costs dramatically, improve the operations and reduce disruptions. In case you want
to know what is the goal of supply chain management, give the goals mentioned above a read. They will
help you take a step in the right direction when creating a productive supply chain management strategy.

Supply Chains as Sources of Competitive Advantage

Optimizing the Supply Chains

A supply chain is the network of relationships between the upstream and downstream activities with all
stakeholders who are involved in this chain of relationships.
To take an example, if a particular good or service has to be delivered to the customer, there are raw
materials that are needed for the manufacture, the forms of transport and means of storage for the raw
materials, the transport of the finished goods to the retailers and the logistics involved in getting the
goods to the customer are all parts of the supply chain that extend from the suppliers to the customers.

In other words, there is a chain of relationships between the firm and the partners involved in this chain.
Therefore, supply chains are comprised of all these stakeholders and the relationships between them
determine the effectiveness of the supply chain.

In contemporary times, supply chains can be sources of competitive advantage as efficient management
of the supply chain leads to cost savings and synergies between the components of the supply chain
leads to greater profitability for the firms. It is for this reason that many business leaders have focused
their energies on optimizing the supply chains for increasing the top line as well as the bottom line.

Supply Chains as Strategic Levers

In times of economic recessions, supply chains can be used as strategic levers as they can be optimized
to perform better than the rivals do so that more profits can be extracted and lesser costs incurred.

The optimization of the supply chain through just in time or JIT methods of holding inventory, focus on
reducing the COGS or the Cost of Goods Sold by rationalizing the expenditure on the components of the
supply chain all lead to a situation that can be extremely beneficial to the firms. It is for this reason that
many firms like Wal-Mart, Proctor and Gamble, Tata Motors, and Unilever has focused on rationalizing
the activities that form the supply chain.

The point here is that with astute management of the supply chain, the firms can derive value from the
process, which can then translate into greater profits and lesser costs.

Apart from this, the supply chains can also be of strategic and competitive advantage because a major
portion of the cost of goods sold or COGS is made up of the logistics and the supply chain expenses.

The Case of Wal-Mart

To take some real world examples, Wal-Mart is one retailer that has managed its global supply chain in
an adroit and efficient manner. As it operates in various countries around the world, it needs to have
control over its global supply chain and this is where the company with its focus on local capabilities and
global movement and integration has made its supply chain leaner and meaner.
Further, the company is obsessed with costs and therefore, it focuses exclusively on how to make its
COGS and the logistics aspects of the supply chain efficient and effective.

Apart from this, the single-minded obsession with reducing costs has paid off handsomely for the
company as it retains its number one position in the retailer market space mainly due to its cost effective
strategies that translate into lower unit prices for the products it stocks.

Of course, there are many who believe that the company over emphasizes the cost reductions in its
supply chain and this has led to some ethical issues.

However, the point here is that in times of economic gloom, Wal-Mart with its aggressive approach to
supply chain management has scored over its rivals. Without suggesting that ethics should be discarded
or ignored, the fact remains that a concentrated effort to rationalize the supply chain can pay off well for
companies.

Concluding Remarks

Finally, the twin challenges of the globalization of the world economy and the increase in the global
complexity of supply chains are formidable and when taken together with the effect of the ongoing
economic crisis, business leaders have their hands full trying to make decisions on how to meet these
challenges.

8 Benefits of Supply Chain Management

Supply chain management can boost business performance. Here are the benefits of an effective supply
chain management strategy, including improved flow of goods and services and improved customer
satisfaction.

Effective supply chain management (SCM) is about streamlining the flow of goods and services across
your whole supply chain, helping you to reduce costs and improve efficiency.

In this article, we’ll explore some of the key benefits of SCM, along with some insight from industry
experts on how to realise these benefits.
1. Better collaboration with suppliers

Suppliers that understand the business’s cost constraints and objectives can be particularly important for
businesses with tight margins. Wing It Cosmetics’ Gahir says that manufacturers selling to retail outlets
that expect a 40-50% markup on the factory gate price can face a profits squeeze if raw material prices
are too high. She recommends when negotiating with suppliers, retail-facing businesses should aim for a
"golden ratio" of no more than 25% for raw material prices as a percentage of retail sales.

But cost is not the only consideration. Flexibility matters too. In volatile market conditions, Eccles of
Employment4Students found that long-standing suppliers were often more willing to accommodate
temporary cash flow difficulties. While it’s tempting to shop around for cheaper alternatives, Eccles
warns against it. “Be cautious about switching purely on cost and remember that long-term relationships
are valuable,” he says.

To help give you flexibility with your supplier payments, the American Express® Business Gold Card gives
you up to 54 days to clear your balance¹. What’s more, for every eligible £1 spent on business purchases,
you’ll receive 1 Membership Rewards® point which can be used with hundreds of retailers on things like
travel, retail and dining. Or, you can redeem points as a statement credit to reinvest in your business².

2. Better quality control

When you and your suppliers are working to the same standards, quality control problems can be
detected earlier. Gahir gives an example: “One of my packaging suppliers contacted me to say that a
batch of packaging that had just arrived wasn’t up to the required standard and she planned to send it
back, which would add three days to the delivery schedule.” However, for Gahir, this delay was a better
outcome than having to deal with a defective batch of packaging herself. Emphasising the benefits of
trust in supplier relationships, Gahir says: “That conversation was only able to happen because we're on
the same page.”

3. Shipping optimisation

Logistics costs have risen significantly, impacting small businesses across the UK. Reducing the number of
separate distribution channels and making use of logistics specialists could reduce your distribution costs
relative to your competitors, helping you to maintain stronger cash flow and profits. “Having too many
suppliers with independent shipping and delivery streams has been the biggest source of inefficiency,”
says Gahir. “We’ve responded to this by looking at storage and shipping aggregators.”

4. Reduced inventory and overhead costs

An efficient supply chain can reduce the need to maintain inventory, therefore cutting overhead costs
associated with storage and security. However, a very lean inventory increases pressure on distribution
networks and reduces resilience to supply chain shocks. So it’s important to identify your optimal
inventory level.

5. Improved risk mitigation

In general, the further along a supply chain issue is detected, the more expensive it is to fix. That’s why
supply chain management, which offers visibility of the supply chain from end to end, is so important.

And it isn't only financial risk that can be mitigated: greater visibility across all your suppliers can reduce
the reputational risk of unwittingly engaging either a company that falls foul of your ESG standards, or
one that operates in a country subject to international sanctions [1].

6. Stronger cash flow

Running an efficient supply chain that is based on good supplier relationships, maintains strict quality
and stock control, and keeps a watchful eye on costs and prices can greatly benefit a business’s liquidity
by improving cash flow.

7. A more agile business

“A good supply chain enables us to adapt to opportunities,” says Eccles. For example,
Employment4Students identified a process inefficiency in a client’s business. Eccles explains: “We
realised we had a couple of suppliers whose software could help and managed to get a process in place
really quickly, which they adopted and found really helpful. So, if you’ve got good suppliers, they can
help you unlock new opportunities.”

As always, however, it pays to be prepared, as supplier capacity can impede business opportunities.
Gahir says that it’s worth investing more up-front to ensure that the suppliers you have in place are able
to scale up as your business grows.

8. Better visibility and data analytics

Business managers can keep in constant touch with suppliers using mobile phone apps, conferencing
platforms and shared dashboards. Software tools can also help to manage stock levels efficiently, track
distribution channels and monitor business performance. Having real-time data metrics at your
fingertips will enable you to put in place contingency plans to enable your business to ride out storms
and take advantage of opportunities as they arise.
The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the
first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card
with no annual fee, rewards or other features, an alternative option is available – the Business Basic
Card.

Membership Rewards points are earned on every eligible full £1 spent and charged, per transaction.
Terms and conditions apply.