7 Reasons Why Companies Need to Understand Their Supply Chains

Many global companies have created stable brands, appealing advertising, and strong connections with their customers, but they still struggle with supply chain disruptions. The efficiency of a supply chain, whether at the manufacturing or the distribution end, can make or break a business, so it’s important to operate with the right supply chain model.

However, this is easier said than done. To improve its supply chain model, a company needs to first understand the various components of the supply chain and how they affect each other. Understanding the complete picture is essential to creating an efficient supply chain model.

Supply chain is as important to business operations as other functions like marketing, finance or sales, if not more so. Improper supply chain planning can hurt a business, so it’s important to thoroughly understand the relevant supply model. Once a company has a clear supply chain model and can manage it effectively, it can reap the benefits of a global supply chain. Efficient supply chain management, or SCM, has the potential to save money for the organization and create a competitive edge in the market for the business.

Here are the key benefits of an efficiently managed supply chain:

1. Increased collaboration

Supply chains have many internal and external stakeholders in an organization and thus require a high level of collaboration to be successful. Enabling and increasing supply chain collaboration is one of the main benefits of  digital supply chain management. Effective multi-enterprise collaboration enables cross-functional teams to break down silos and work together to drive value across the enterprise.

2. Better quality control

One of the top advantages of SCM is the kind of control a company can achieve over its operations. Businesses can perform quality control in manufacturing, marketing and sales, but if they do not pay equal or more attention to quality in logistics, all efforts made in former domains will be in vain. An efficient supply chain system helps improve quality control in the supply chain.

3. Increased efficiency

Having real-time visibility into any expected delays in the procurement, manufacturing and distribution stages is an important aspect of supply chain management. Visibility provides businesses with the right tools to make the right decisions at the right time. This is one of the most significant benefits of supply chain integration.

Once a company can track these variables, which may not even be in its control, it is in a position to handle the business better. Deploying a supply chain management software in operations can help automate supply chain and increase efficiency.

4. Better demand management

Supply chain management can help an enterprise handle shifting demand with ease. It is not only helpful in a situation when the demand is high, but also in lean periods. With supply chain management software in place, enterprises have advanced tools to forecast demand and handle supply accordingly, allowing them to improve customer experience and brand image.

5. Reduced costs

One of the most apparent benefits of a digitalized global supply chain is the ability to reduce costs, especially in periods of rising inflation. A digital supply chain enables a company to reduce costs and increase profitability by providing AI-powered forecasting and analytics capabilities, allowing users to manage production, inventory and distribution in real time. By doing so, supply chain managers can make better decisions and respond more rapidly to risks and disruptions.

6. Optimized logistics management

According to The State of Logistics Report 2021, businesses could reduce logistics costs by 4% even in an unpredictable year like 2020 by identifying new ways of moving freight. Deploying an efficient supply chain system helps optimize the logistics management function in an organization. As supply chain managers identify the loose ends and scale up what’s working, they can create an optimized structure of logistics management in the organization.

7. Improved cash flow

All the benefits described above enhance business functions and improve profitability. For instance, once a supply chain organization can identify better partners with a low-cost structure that can handle changing demand more efficiently, it can have a more direct contribution on a business's profitability.

These are some key advantages of an effectively managed supply chain that can help increase overall efficiency in the organization. The right supply chain management software can help companies get started. 

First, however, companies must understand the specific supply chain requirements for their business and industry. Most importantly, they should work toward creating a unified model of their supply chain data to help them take advantage of what it offers.