When we talk
about the importance of Supply chain management
we try to bring
into sharp focus the loss due to the absence of an effective
supply chain strategy and / or the benefit due to a well oiled
supply chain for any firm. Basically, it is a question of how
good is the integration of supply chain that matters for any
Of critical importance in today's business scenario is managing
competition through partners.
An independent firm on its own may
not have all the resources to match its competitors. But by
having an upstream and a downstream arrangement of getting the
input , processing it into output and then pushing it to the
downstream for distribution with effective chain partners it can
face any business challenges.
Importance of having a robust Supply
Chain Management can be understood by an example:
ABC manufactures the cycle chains for a cycle manufacturing
company XYZ. Another company PQR manufactures bits used in the
cycle chain manufactured by ABC.
In coming days ,as per the market forecast, XYZ shall be needing
50,000 units of cycle chain ,an information that is not
available with ABC.
Accordingly, PQR also does not know how many
bits to produce in order to meet ABC's requirement. The result
would be either both ABC and PQR hold high safety stock
inventory or lose business respectively with XYZ and ABC.
Now, if in this example showing only three supply chain
partners , absence of a critical information among
is of production forecast at XYZ firm results into either a
higher inventory level or loss of future business what would
happen if the supply chain consisted of a large number of
partners, a scenario normally existing for medium to large
sized companies ,the world over ?
In an era
of gaining competitive advantage through reduced
inventories all over ,a company is going to have
terrible disadvantage of having to carry unnecessary
inventory for the fear of losing future business.
The importance of Supply Chain Management thus is in :
Reduced inventories along the chain
Better information sharing among the partners
Planning being done in consultation rather than in
The benefits too would be reflected in terms of :
Process integration and other efforts result in improved
quality as higher profit margins shall get reflected in
creation of better facilities for manufacturing, product
design research, enhanced customer service.