The Importance of Supply Chain for Business Success
Your supply chain has to be low cost, efficient and operate without delays in order to keep customers and operate your business with a positive ROI.
We are living in a fast-paced world where people are running tight schedules with no time to spare for inconveniences. If a business is to attract and retain the modern consumer, delivering what they need in a timely manner is very crucial. Competition is tough out there, and businesses who value customer’s time are setting the example. One slight delay and the customer changes ship to the next business.
In addition, on top of timely deliveries, it is critical for businesses to do it cheaply without compromising on quality if they are to realize good profits. The only sure way to achieve this is by managing supply chains effectively.
Technically, the supply chain refers to the movement of goods from their raw form to finished products in customers’ hands. If a business is to be successful, this chain needs to be efficient, low-cost, effective, and without delays.
That being said, here is why the supply chain is important for business success.
1. It enhances customer service efforts
There is no way around it; customers expect products to be delivered in the right quantity, at the agreed time, and at the right location. In addition, if they purchased an item that requires regular services afterward, they expect prompt after-sales service. Excuses can be extremely disappointing especially when there is a need to use such an item instantly.
For instance, if a customer’s HVAC system breaks down in the winter, even a few hours of delay can be too much delay. An effective supply chain ensures that the necessary parts are readily available for such incidences. If they are not in the warehouse, the managers should have an alternative place to get them promptly. In this example, you can easily get even the hard-to-find HVAC parts at a reputable supplier in a timely manner. This can ensure that you move in quickly for such repairs.
When you are able to provide the customers with the services that they need in a timely manner, it goes a long way in boosting customer satisfaction.
2. It reduces costs
One aim of an effective supply chain is to reduce operating costs. Imagine a situation where a manufacturing plant has to shut down for a day or two because raw materials are delayed somewhere. It would cost millions in terms of wages as well as cause delays in the rest of the chain. An effective supply chain ensures that factories never run into raw material shortages to avoid delays.
In addition, inventory-holding expenses are reduced when retailers are able to deliver goods to customers quickly. This is because the need to keep items in the stores longer than necessary is eliminated. Also, a supply chain that manages to ship goods, such as kitchen cabinets, from the manufacturer directly to the consumer avoids this cost entirely. It is especially helpful when dealing with items that can easily become obsolete.
3. It enhances the financial position of a company
Making profits is the number one reason why businesses exist. That is, any opportunity to maximize it should be grabbed with both hands. Supply chains help businesses maximize profits in a number of ways. As said earlier, an effective supply chain aims at reducing production, holding, and transportation costs. When production is done in bulk, even a slight reduction in these costs can have the company saving millions of dollars. These savings translate to more profits for the organization.
Secondly, quick delivery of goods to customers avoids a delay in invoicing. For instance, if you are able to deliver goods in 5 days rather than 10, you get to invoice him or her 5 days sooner. This means that you get paid sooner, which in turn enhances the cash flow.
In addition, if a supply chain is able to reduce the number of warehouses a firm needs to store their goods, it saves the money which could have otherwise been used to build extra warehouses. In case they are already there, the firm can make extra income from renting them out.
Conclusion
Some businesses tend to underestimate the value of effective supply chain management. It could probably be because they don’t really know how it benefits their businesses. If you were in that category, now you know its importance. In fact, one characteristic shared by most successful organizations is the ability to manage their supply chains effectively. If you want to join the big wigs, start paying attention to your supply chain.
