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Advantages and disadvantages of supply chain management

What is SCM or Supply Management Chain

Supply chain management ( SCM )  is the process of planning, commissioning execution and control of the operations of the supply network in order to meet the needs of customers as effectively as possible .  The management of the supply chain goes through all the movement and storage of raw materials , the corresponding inventory that results from the process, and the goods finished from the point of origin to the point of consumption. The correct administration of the supply chain must consider all the possible events and factors that may cause an interruption. 

This sequence consists of several links or processes (purchasing, supply, stock management, transport, maintenance …) in which different actors such as suppliers, manufacturers, distributors, wholesalers, retailers and customers or end consumers participate.

All of them work side by side so that we can enjoy a certain product or service, but what phases do we differentiate in the Supply Management Chain?

  1. Supply . How and where do we get the raw materials

  2. Manufacturing. Convert these raw materials into finished products.

  3. Distribution. Transfer the final product to the shops, factories and places of sale so that it can be purchased by the consumer.

Thus, the Supply Chain is present in each phase of the process of a product or service, encompassing all the management and logistics activities. What for some may be the final product, for others it may be the intermediate product or even the raw material.

Some experts distinguish between supply network management and logistics management , while others consider them interchangeable terms. From the point of view of a company, the scope of the first is limited, in terms of resources, by the suppliers of its supplier, and on the client side, by the contractors themselves.

Logistics vs SMC

Although there are many who link the Supply Management Chain with the concept of logistics, the truth is that there are differences between them. According to the CSCCMP, logistics involves the planning and control of all activities related to the supply, manufacture and distribution of goods and services of a company; For its part, the SMC is the chain that unites any company from the acquisition of raw materials to the delivery of the finished product.

Advantages of SCM or Supply Management Chain

Once these concepts are clarified it is time to see why it is good to implement an effective supply management chain in your company. Here we detail what are the main benefits it generates:

  • Fidelity of the clients. Thanks to the efficiency in the production processes, customer service improves in aspects such as delivery time, purchase conditions … This causes customers to have the brand in mind when they think about these specific products. If the shopping experience is satisfactory, they will repeat.
  • Better control When the whole process is defined, we can know in real time and at all times in which link of the chain the product is located. This allows greater control with external actors such as suppliers, being able to quickly and easily access a greater number of offers. In addition, it allows to track the dates of supply entries, production, distribution dates, etc.
  • As a result, small conflicts or everyday problems are reduced.
  • More profitability All operating costs of the supply chain are reduced by 20-30%.
  • Improves competitiveness and allows reaching new markets.
  • Leadership. A good implementation of the supply chain, besides having good results for an organization, will also make you stand out in the market as a leading company. Customers also play a decisive role, if they choose you they will end up becoming a reference.
  • Greater unity in the team. Each actor in the chain knows what their functions are, when they should be carried out and the importance of working as a team. They work like a real chain in which each piece is key to achieve that the product arrives in the best conditions to the final customers.
  • Loyalty of customers: By achieving higher levels of efficiency in production processes it is possible to improve customer service in terms of price, delivery time, purchase conditions, etc., which is reflected in the behavior of the client before the company and its products and improving the positioning in his mind, thus reaching greater capacity to retain customers. 
  • Entry to new markets:It is only possible to face international competition if you have the capacity to do so, if you have competitive prices and processes. This competition not only occurs when companies interfere in export processes but when new international entrants venture into domestic markets. 
  • Market leadership: Once the loyalty of the clients has been obtained and the ability to attract the new ones, it will be possible to think about leading the market, in the end it is the client who defines the leaders. 
  • Reduction of problems with inventory, security inventory and obsolescence.

Disadvantages of SCM or Supply Management Chain

  • Departmental warsSupply chain projects involve multiple departments, such as purchasing, planning, manufacturing, distribution and Information Technology. 
  •  Weak leadership When intervening multiple departments, supply chain projects need a strong senior executive and that is capable of acting to eliminate those points of interdepartmental disunity because there will be numerous challenges to be solved. 
  • Slowness of reach.It is often observed how projects become complicated over time, due to the addition of new functions and features. In the end you end up with an inflated project that is so extensive that it will never be completed or that, if completed, you will not get a profit on solid investment. 
  • More attention is paid to Information Technology, than to the quality of the data and the security of the same. 
  • The benefit on investment is difficult to measure 
  • The bad habits take time to disappear 
  • The costs are difficult to quantify.
  • The time and planning required for its implementation.

 

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