Why Is Supply-Chain Management Important to Business?

Supply-chain management is the process of streamlining the supply line in order to increase production and profit flow. The concept connotes working the supply chain with the goal of creating a competitive edge in your company’s niche in the marketplace. While that definition is correct, it simplifies a very complex set of actions that need to take place for a company to successfully manage a supply line and become competitive and profitable.

What Does Supply-Chain Management Entail?

Supply-chain management is an overarching management term that encompasses many functions in a corporation. There are many spots in a supply chain that can affect the production of products and services and on-time presentation to a customer. The supply-chain management team focuses on the suppliers and materials supplied, keeping them flowing positively in a timely manner to be production-ready when needed. Additionally, managing suppliers means keeping the supply cost as low as possible by judicious management of on-time delivery. With on-time delivery, manufacturers do not have to spend money warehousing a large amount of materials and supplies, nor do they have to pay extra shipping costs on items that need to be rushed because they are late.
The supply-chain management team oversees everything, including suppliers, production, product development and the technical tools and systems that automate and store information for these processes.

Breaking Down the Supply Chain

Even for a small company, supply-chain management is crucial to profitability. There are costs involved with procuring materials and supplies, including material costs and shipping costs. For intellectual property, there are development and storage costs. Storage costs can add up quickly for materials and supplies, and quality-assessment costs accrue for incoming and production line assessments.
Other issues that can increase costs are material shortages, which may result in paying higher costs for materials and/or shipping to acquire the materials in time to keep production lines flowing. Often, it is more costly to stop a production line than to overnight-ship materials to the manufacturer.
It is easy to see why a top-notch management team is required to keep all of these complex elements of the supply chain in sync and continuously flowing properly. Anywhere along the way, a small problem can quickly escalate into a large one, costing a manufacturer time and money and potentially costing the end customer problems, as well.
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