Importance of Supply Chain Management in Modern Businesses

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IIM Udaipur's One Year MBA in Supply Chain Management program offers concentrations in Global Supply Chain Management and Digital Supply Chain Management and other elective that allows students to tailor their education to personal and career objectives.

1.  What is supply chain management?

Supply chain management, or SCM, oversees how goods and services evolve from idea creation and raw materials into a finished consumer product. It includes moving and storing the materials used to produce goods, holding the finished products until they sell and tracking where sold products go so that you can use that information to drive future sales.

The main goal of the supply chain manager is to streamline all aspects of the chain and processes, thus resulting in profit maximization and reduction in product defects.

2. Modern Business and Customer Expectations

The digital supply network integrates data and information from various sources to drive the distribution of manufactured goods along the value chain. It incorporates cutting-edge technologies such as Artificial Intelligence (AI), blockchain, and automation. Consumer demands and expectations are rising as a result of these developments. When it comes to online purchases, consumers are increasingly demanding more convenience, particularly delivery. They want various delivery options and to receive their products as quickly as possible.

These expectations have put additional pressure on manufacturers to ramp up production. Thus, improving productivity and managing the supply chain can help manufacturers stand out and be seen as more reliable. There are four opportunities where modern businesses use the potential of supply chain management to have an edge over their competition.

3. Predictive precision in forecasting

The combination of machine learning, artificial intelligence, big data and advanced analytics can dramatically increase the sophistication and accuracy of demand forecasts, allowing manufacturers to predict demand more accurately, at a more granular level and over a longer time horizon. In addition to improving inventory allocation decisions for base SKUs, these systems can help companies predict the impact of promotions and new product introductions. Even the most sophisticated forecasting technologies can only work with good data and produce results if the organization acts on the information it receives.

4. Flexible execution over flawless execution

Robust plans need to survive the real world. This requires manufacturing and warehouse operations to work efficiently, reliably, and quickly. The best companies achieve those goals through experimenting between new technologies and old-fashioned process discipline. They use a lean process and other performance improvement techniques to cut costs, streamline activities, cut error rates and increase reliability. They invest in robotics process automation, especially in warehouse processes, to accelerate the handling of complex orders. And they use innovative IT tools to track performance against real-time targets.

A virtuous circle can be created by fast, flexible manufacturing, accurate planning, and close coordination between commercial and operations functions. Shorter-term forecasts allow for shorter order-to-delivery lead times. When manufacturing and logistics operations have accurate predictions, they can streamline their processes, reducing buffer stocks and other waste sources.

5. Master the complexity pipeline

Poorly controlled new-product-introduction and experimenting with new processes can lead to portfolio proliferation and skyrocketing numbers of SKUs to forecast, manufacture and manage. Reducing delivery performance while raising supply-chain management costs can result in excess portfolio complexity that can outweigh any profit the products generate. As we are in an era where we expect many options, so maintaining the vast range of products while having a lean supply chain becomes all more important.

6. Create a competitive advantage with sustainability

With global efforts to raise awareness about climate change increasing, more consumers are checking the eco-credentials of companies from which they would purchase products or services. It's no longer enough for companies to reduce their packaging, although this helps. Consumers are digging deeper, pushing companies to revamp their working ways. In some places, legislation is also involved as governments try to move towards net-zero to uphold their climate agreements.

One of the advantages of supply chain technology is that it can manage processes down to the smallest detail and generate complex reports that would take humans a long time to produce; when it comes to lowering your carbon footprint, the finer points matters and making cuts where you can make a more significant impact overall.

Henkel, for example, employs a system that provides them with real-time data on their factory's energy and water consumption. The same system has been improved to give them a complete picture of their supply chain and transportation analytics.

7. Conclusion

Competitiveness and modernization have allowed the company to rethink its entire operation and restructure it to focus on its outsourcing processes and core competencies that are not within the company's core competencies. Due to the competitive market, it is the only way for modern companies to survive. Applying SCM will impact their market positioning and strategic decision on choosing the right partners, resources, and workforce.

As a leader in a one-year Global Supply Chain Management course, IIM Udaipur understands the importance of career advancement and its accompanying challenges. IIM Udaipur's One Year MBA in Supply Chain Management program offers concentrations in Global Supply Chain Management and Digital Supply Chain Management and other elective that allows students to tailor their education to personal and career objectives.

I am Akshay Bangera, and I have four-plus years of experience in the domain of Mission Critical Systems specializing in Project Development. Currently pursuing MBA in Global Supply Chain Management from IIM Udaipur. I love playing football and reading books.

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