The importance of supply chain management is Supply Chain Management involves the development of your operations to spread both pace and ability. Amazon.com, Souq.com, Jollychic and Alibaba are famous examples of online stores that many people rely on, but have you ever wondered why Online products are cheaper than what you can purchase at regular stores? Well, let me introduce you to Supply Chain Management (SCM).
What is Supply Chain Management?
Simply speaking, Supply Chain Management is planning, leading, organizing and controlling all activities required within an organization to produce products or provide services starting from raw materials, production process and distribution process to intermediaries and final consumers. The main goal behind SCM is to be cost and time efficient. In other words, Supply chain helps companies in identifying the main activities of their process and based on that they can eliminate or add activities that reduce cost and increase productivity,
Supply Chain Strategies
There are many applied strategies of the supply chain in real life, below are some of those strategies & importance of supply chain management:
All of us heard or read the sad news that Netflix killed the last video shop which we enjoyed visiting every weekend to get a DVD or CD for a long entertainment night. That day was the beginning of a new chapter called “digital business”. Digital businesses are companies who perform their activities on the CYBERNET. So how digital business is an example of SCM. Companies notices that by becoming a digital business they eliminate the rent cost of warehouses and stores and replace it by directly getting the product from its producer.
Ready on Time
Natural disasters, especially earthquakes are very common incidents in Japan which leads to severe financial troubles for companies although japan is at risk most of the time, its GDP is always on the top. So how Japanese got over the issue, for instance Toyota pioneered a strategy called “Ready-On-Time” where cars are produced at the time of the order and shipped directly to the requested country. This strategy reduced the cost of warehouses and the risk of damaged stock left in warehouses from any unexpected natural disasters.
What if your supplier went bankrupt and disappeared? Should you close or stop producing until you find another supplier? Supply Chain suggest that companies should have diverse suppliers in order to avoid relying on one supplier and variations in components quality and cost.