Primary Business Benefits of Supply Chain Management
Supply chain management helps small businesses meet purchasing and production requirements efficiently. The Council of Supply Chain Management Professionals defines the process as “the planning and management of all activities involved in sourcing and procurement, conversion and logistics.” Supply chain management is also a method of improving coordination and collaboration with suppliers, distributors, service providers and customers.
Access
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Securing access to essential raw materials, components, supplies and services is a key benefit of supply chain management. Instead of dealing with suppliers on an ad hoc basis, companies negotiate long-term supply contacts so they can be confident of obtaining the supplies they need to run their operations. Securing access is particularly important for critical components or scarce raw materials that have limited stocks.
Cost
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Supply chain management can reduce the cost of obtaining supplies. By placing contracts with members of a supply chain, companies eliminate the procurement costs of finding suppliers, negotiating terms and placing individual purchase orders. The long-term contracts characteristic of supply chain management also reduce the risk of price fluctuations over time, helping companies budget accurately for their supply costs.
Quality
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Members of a supply chain can agree to harmonize their quality standards, making it easier to ensure the quality of the final product and reducing the cost of quality control. By agreeing to work to a widely recognized standard, such as ISO 9001 published by the International Organization for Standardization, members can provide products and supplies to a consistent quality. Other members do not have to inspect incoming supplies that comply with the standard, reducing costs and improving efficiency throughout the supply chain.
Responsiveness
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Communication between members is a feature of supply chain management. By keeping suppliers aware of changes in demand, the lead company can ensure that it obtains the right supply level. Information on demand enables suppliers to increase or reduce their capacity efficiently, eliminating the risk of waste or delivery delays.
Collaboration
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The close working relationships in a supply chain encourage collaboration to drive down costs, improve efficiency or increase innovation. Members may agree to collaborate on cost reduction exercises, for example, by changing delivery patterns or streamlining ordering processes. They also may work on design projects, customizing component designs or raw material specifications to match the lead company’s requirements.
References
Writer Bio
Based in the United Kingdom, Ian Linton has been a professional writer since 1990. His articles on marketing, technology and distance running have appeared in magazines such as “Marketing” and “Runner's World.” Linton has also authored more than 20 published books and is a copywriter for global companies. He holds a Bachelor of Arts in history and economics from Bristol University.