Pros And Cons Of Supply Chain Management

Pros and Cons of Supply Chain Management ! To start with a pro – If you love challenges then this is the field for you. Everyday you will face a new challenge and a new learning path. From cons point of view you will find yourself as a lone fighter. You will have to work on multiple solutions for a particular problem.

The majority of businesses concentrate on manufacturing, finance, marketing, and other departments, but relatively few organizations focus on supply management, which is a critical system if a company wants to gain an advantage over its rivals.

In basic terms, supply chain management is the methodical management of the flow of products from the raw material stage to the final stage, when the product is delivered to the consumer.

Like every coin has 2 sides, every system has pros and cons. So while learning about supply chain we should also learn about pros and cons of supply chain management.

Like every platform or system or business there are many advantages of supply chain management as well as disadvantages. We will discuss about both advantages and disadvantages of supply chain management in this article.

As the complexity of supply chain operations grows as a result of globalization, companies are increasingly adopting analytical standards to improve their decision-making capabilities and supply chain efficiency.

A company must invest in responsible supply chain management to react to disruptions effectively and sustainably to survive the competitive climate and guarantee qualitative development.

When a company uses efficient supply chain management, it gains a competitive edge in its sector by lowering the inherent risks associated with purchasing raw materials and selling products or services.

To get a better understanding of this topic, consider the pros and cons of supply chain management:

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What Is Supply Chain Management ?

It is a bit of a complicated procedure to get a product into the hands of a consumer finally. This is because there are several processes involved that are both internal and external. There are many management methods that businesses follow but one of the best ways for effective customer management is following a strategic supply chain management.

Frankly speaking, the supply chain involves all kinds of activities, organizations or companies, people, information, and resources that are needed in the process of a product’s inception to the customer’s hands.

On a similar ground, supply chain management is nothing but managing a supply chain discussed above. It is the management of the flow of services or goods including all relevant processes for transforming raw materials into final products. This supply chain management helps to optimize the supply-side of all businesses and also enables them to create a solid foundation among their market competitors.

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Pros And Cons of Supply Chain Management

A firm that specializes in supply chain management will have a thorough knowledge of these scenarios and their potential drawbacks. A strong supply chain management system will save costs and ensure that every dollar is spent wisely.

Your supply chain and company can remain ahead in a competitive market and achieve more success than ever before with smart management, cost reduction, and risk mitigation.

All companies need systems to function daily and to flourish in the long run. A supply chain management provider may be a useful solution for businesses with complicated supply chains since it streamlines everyday operations and relieves administrative burden.

A bad supply chain management system, on the other hand, maybe expensive in more ways than one.

So, read on to learn about the pros and cons of supply chain management:

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Pros of Supply Chain Management

Advantages of Supply Chain Management
Advantages of Supply Chain Management
  1. Cost-effectiveness 

Supply chain management aids in the organization’s cost-cutting efforts. It seeks to optimize all business processes to reduce manufacturing, packing, storage, and transportation costs, as well as to prevent any waste of products by enabling timely delivery. It reduces total operational costs and increases overall profitability.

Supply chain management offers inventory management software that enables managers to profit from an on-demand or lean inventory model to optimize the result of internal inventories.

Furthermore, companies may guarantee maximum cost-effectiveness via efficient accounting administration and automated procedures. Automation also implies more accuracy, fewer mistakes, and a quicker flow of data, which not only improves efficiency but also improves cash flow.

Supply chain management assists a company in achieving cost efficiency by lowering various costs such as transportation, warehousing, packaging, and reducing wastage through timely delivery of goods, among other things.

This ultimately assists the company in achieving cost efficiency, which in turn increases the company’s profitability.

  1. Boost Productivity

Supply chain management aims to boost a company’s overall productivity. All production processes are monitored by supply managers, who ensure that all resources are utilized efficiently. Any resource waste is prevented, resulting in higher total production.

Supply chain management helps to data-driven decision-making and lucrative collaborations, which is one of its major advantages. There are also techniques and technology in place to perform predictive risk assessments so that changes and disruptions may be effectively handled.

As a consequence, companies have a well-functioning supply chain with happy customers and simplified invoicing procedures.

When your company uses supply chain management systems, it will be able to respond more quickly to changing economic conditions, emerging markets, and shorter product life cycles.

  1. Reduction in Time

One of the most significant benefits of supply chain management is that it reduces distribution discrepancies, logistical mistakes, and manufacturing and shipping delays via efficient communication and collaboration.

The supply chain manager ensures that all materials are procured on schedule to guarantee continuous product manufacturing. They also control all company delivery and logistics services, ensuring that goods are delivered on time and to the correct place, preventing any delays.

This will reduce late shipments from suppliers, logistical problems in distribution routes, and manufacturing line delays since everyone is aware of what they’re doing as well as what others are doing.

  1. Problem Areas Can Be Easily Recognized

Supply chain management enables a company to identify problems that are impacting its reputation and profitability. Managers can simply monitor each department’s performance and determine whether one is falling short on its responsibilities.

Without proper supply management, a company will have a difficult time identifying problem areas because each department will blame other departments for failure. However, with this management, a company can identify the problem areas in the company that is causing the company’s profitability and reputation to suffer.

  1. Improved Collaboration

The supply chain management process improves cooperation amongst many business partners. It focuses on establishing a good communication channel inside the company to prevent any misunderstandings or disagreements.

The free flow of information across all stakeholders, including workers, customers, suppliers, and distributors, improves understanding, resulting in greater cooperation.

Fostering lucrative connections with suppliers and distributors is part of supply chain management. Collaboration with suppliers may be strengthened via efficient communication and cooperation, resulting in increased production and cost savings.

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Cons of Supply Chain Management

Disadvantages of Supply Chain Management
Disadvantages of Supply Chain Management
  1. Implementation Is Expensive

The method of supply chain management has a major drawback that is it’s very costly to execute. It requires a significant commitment of time, money, and other resources, which small companies cannot afford.

  1. Complicated

The supply chain management process is complicated by the fact that it includes many divisions within a company. Because it involves multiple departments, it can be complicated at times, causing workers and employees to feel insecure and demotivated.

It has the potential to cause confusion and obstruct company operations. Employees may be reluctant and demotivated to embrace this idea since it is new to them, causing a slew of additional problems.

  1. Inconsistency in Departmental Coordination

The most significant drawback of supply chain management is that it can only function if all of the company’s divisions are well-coordinated, and if departments are at odds, the system will collapse.

As a result, if the marketing department fails to notify the production department of a potential order, the production department will be unable to fulfill the order on time.

Establishing coordination across many divisions within a large corporation is a tough job, and this idea may ultimately fail.

  1. Requires Well-Trained and Personalized Workforce

For its successful leadership inside the business, supply chain management needs skilled and trained human resources. The company will have to spend a lot of money to hire a professional and highly trained workforce. It may be negative for small businesses to adopt.

As a result, small businesses rarely implement supply chain management because the costs of doing so outweigh the benefits.

  1. Insufficiency of Reliability

Supply chain management is unreliable since it is entirely reliant on the method of information sharing between various departments. Any instance of incorrect information exchange by any department will hurt the supply chain’s overall performance.

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The Advantages of Supply Chain Management Systems

Supply chain management is a process that helps organizations manage the flow of goods from suppliers to customers. Systems that use supply chain management help businesses optimize their production processes and reduce waste.

Additionally, supply chain management systems can provide visibility into the health and safety of products as they move through the supply chain. These systems can also help companies identify potential problems early on, saving them time and money.

There are many benefits to using a supply chain management system. By optimizing production processes, businesses can reduce waste and improve efficiency. In addition, by monitoring the health and safety of products throughout the supply chain, companies can avoid costly delays or product recalls.

Furthermore, by providing comprehensive visibility into the entire supply chain, companies can identify problems early on and take appropriate action.

What Is An Example of Supply Chain Management ?

Nowadays, technology has advanced a lot and introduced the latest concepts of blockchain or big data that have streamlined the entire process of the supply chain smoother for businesses. Long before, these technologies were not there and only information sharing was supported.

Using that, Walmart and P&G started to connect their supply chains in the late 1980s which helped to reduce their costs.

As an example, Walmart utilized its POS system to send a notification to its distribution centers for sending additional products when P&G products become lower. If the distribution centers also could not send those additional products due to low stock, an alert automatically gets triggered to the P&G distribution centers for sending additional products.

Thus, leveraging this constant communication cycle, the manufacturing was well-balanced even during excess demand. Moreover, the billing and payment process also got automated.

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Which Is Better Operations Or Supply Chain Management ?

Supply chain management is mainly external to the company related to obtaining the raw materials and delivering them. On the other hand, operations management is managing the operations that happen within the industry.

Both these operations and supply chain management are important for a business to run effectively and efficiently and generate better profit margins. They are interlinked somehow with each other. Supply chain management focused on the production without which operations management can’t be done as there will be no products.

So, most industries need both of them no matter whatever field the businesses are involved in. However, small industries also sometimes overlap both of them to be managed by a single manager since the skills for both roles are almost similar.

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What Are the 5 Basic Steps of Supply Chain Management ?

In supply chain management, there are 5 basic stages or steps that are to be followed as listed below:

  • Planning: Just like any other management strategy, the first and foremost step is proper planning. Companies must decide beforehand whether to manufacture a product on their own or buy it from some supplier.
  • Sourcing: This step involves the process of obtaining or organizing raw materials or other components.
  • Making: Scheduling of production activities, testing activities, packaging, the release is the basic things included in this step.
  • Delivering: This step involves the various steps from processing the customer inquiries to a selection of distribution strategies and also the transportation options.
  • Return: After delivery, there can be a lot of return requests too. This step encompasses all those activities like identifying the defects and managing the return of defective items.

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What Are the 4 Components of Supply Chain Management ?

Managing a strong supply chain is crucial for a company’s bright future. Four main components make a strong supply chain. Those four components are:

Integration – This component is the technological procedure for coordinating the supply chain’s functionalities. All actions and integrations are included in this element of supply chain management.

Operations – Daily operations management is also essential to manage a strong supply chain. That can enable us to point out the loopholes and optimize the performance of the business.

Purchasing – Sourcing, and procurement functions are involved in this component which is essential since, without products, businesses can achieve nothing. These products can be services, real money, or whatever the business deals with.

Delivering – The final component of supply chain management is delivery to the customer. Whether you want to handle delivering yourself or outsource it to some other third-party company, a proper distribution strategy should always be there.

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What Are the Consequences for The Management of Supply Chain ?

Proper management of the supply chains is of utmost importance for the businesses since it is beneficial for the organization from all aspects. Any company’s success depends on customer satisfaction and that is guaranteed by well-maintained supply chain management. Full trust and customer satisfaction is a key factor for making a brand popular and that can be very well achieved through supply chain management.

Supply chain management boosts customer service by ensuring the right quality, delivery timings, and after-sales service. It also helps to reduce production costs by decreasing the purchasing cost, production cost, and total supply chain costs.

All these costs are various types of liabilities of an organization since they fall in the expenses field of the balance sheet. Thus, reducing them can help organizations to increase their profit margins and overall sales. Moreover, having a solid supply chain can help to decrease large fixed assets such as warehouses, plants, etc. Also, the cash flow is increased because the products get delivered earlier.

So, avoiding or ignoring supply chain management will cut out all these advantages. Poor supply chain management can also result in delivery delays, quality defects, and thus bring down the reputation of any brand.

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Supply Chain Department Functions

The supply chain department functions within a company to ensure the efficient and reliable shipment of products and services. The department oversees the organization and function of the company’s distribution network, manages inventory and releases products when necessary, and persists with product quality goals.

Final Words !

As the world accelerates, it is on supply-binding chain management professionals to update their skill sets in a way that allows them to gradually contribute to an organization’s success. This also allows them to seek exciting career development possibilities and improve professionally.

As can be seen from the above, there are several pros and cons of supply chain management, which is why any business considering adopting this management should carefully study the above points before deciding whether or not to implement supply chain management.

We hope that you have liked this entire discussion on supply chain management. No matter whatever business you run, it’s always better to leverage the supply chain management and get the taste of all the advantages that it provides.

Thanks, have a great day!

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