What is supply chain management and why is it important for manufacturing companies?

Supply Chain Management

Big or small, every manufacturing company operates in a supply chain of manufactured goods/products and support services. In this chain, the company manages sales, purchasing, delivery and financial transactions between customers and suppliers. Information is a key factor for these transactions with the need for real-time availability and flow between all companies involved.

Effective and efficient management of this supply chain is mission critical as an optimised supply chain leads to a faster production cycle, lower costs, increased margins and more profits – ultimately providing companies with a competitive advantage.

If manufacturing companies manage their supply chain well, they can also drive positive customer experiences and support company expansion.

On the other hand, a poorly managed or inefficient supply chain will result in duplication of effort, unnecessary paperwork and slow response times – ultimately leading to delays, customer complaints, etc.

Consequently, improving supply chain performance is a crucial business objective.

What is the supply chain?

In a nutshell, supply chain is an interconnected ecosystem of companies, people, processes, activities, information and resources who are all working together to move a product or service from supplier(s) to customer(s).

The chain starts with customer demand and includes the management and coordination of activities from the delivery of raw materials and components from suppliers to the manufacturer and to final delivery to the customers and consumers.

When a manufacturing company is concerned, this supply chain structure includes all functions and processes from enquiry to invoice e.g. enquiry, quotation, product development, marketing, production, purchasing, distribution, finance, customer service, etc.

The supply chain also includes all the activities linked to customers and suppliers that are required to fulfil a customer request, i.e. incoming or outgoing deliveries, purchase orders, stock levels, subcontractors, etc. It’s a fair amount of activity to organise!

Fortunately, the rise of integrated business software, automated systems and high-speed communications such as emails over the last two decades have really enhanced supply chain management, making it easier to manage effectively.

Summary – why effective supply chain management is important

Aside from the apparent advantages of lower costs and a faster production and delivery cycle, there are multiple reasons as to why good supply chain management is a must for any manufacturing business.

1. An improved flow of products and materials means shorter wait times from suppliers and faster delivery to customers meaning less inventory being held and less cash tied up

2. Customer satisfaction is improved and therefore the opportunity for repeat business thus enabling a sustainable business relationship

3. Better financial flow – improve your cash flow with faster processing times and less silo processes

4. Better organisation of material flow and reliable supply from suppliers prevents lost production time

5. Minimise waste and administration time by only ordering what is required

So how can ERP software make a difference in supply chain management? We will discuss this in Part 2.

If you want to discover how ZEST I/O can help your business, please get in touch with our team. We will be delighted to discuss how our Cloud ERP software can help your business!

If you’d like to find our more about supply chain management, AllThingsSupplyChain is a very useful and informative site.