Supply chain management concepts and practices

Supply Chain

There are a lot of benefits of supply chain management, to the point where it is absurd to ask what they are. What benefits are there of not engaging in supply chain management? None. So the reverse is also true. Supply chain management, among other things, ensures that you get the products/materials you need on time, on cost and to spec. While this obviously enhances the firm's value, it also enhances customer value. Customers get products at a lower cost, with fewer delays, and also to spec. The benefits of supply chain management are often passed onto the customers to help the firm gain competitive advantage.

Supply chain integration reflects the process by which the supply chain system is integrated with the demand system. An example would be a retail store that sees demand for snow shovels in advance of a blizzard, and the integrated system ensure that manufacturers can tap their inventory supplies and get them to the stores in time to sell them. This process will typically involve multiple organizations, and certainly multiple departments, so a lot of the integration aspect is the result of communication between relevant parties. Customers enjoy superior outcomes as the result of supply chain integration because the company is better able to meet demand. The customers create the demand, and supply chain integration better enables the company to meet that demand, so customers do not experience shortages or cost increases as the result of this process.

3. If a company fails to embrace supply chain integration, there are many outcomes, most of them negative. Essentially, supply chain integration when it works allows for the company to work smoothly, cutting out excess inventory, reducing shortages and simply better aligning the goods coming in with the demand for output. Thus, if there are no supply chain integration efforts, the company is likely to experience each of these negative consequences. It is likely that the company will have shortages more frequently. They may need to spend more to bring goods in at the last minute, compared with having them ordered ahead of time. If shortages are chronic, it is likely that a competitor will win some of this market share. The result for the company with the shortages is that it could see a decline in its market share over the long run. This leads to revenue declines as well as it loses customers.

It is also possible that a lack of integration will cost the company in its relationships with suppliers. Suppliers like to have certainty just as much as customers do. What happens when there is a lack of integration is a mismatch between orders and demand. So that means there are going to be more returns, which are bad for suppliers. Integration helps to reduce the number of returns, which will be better for suppliers in the long run. Thus, there are no positive consequences to ignoring supply chain integration, and many positive outcomes for pursuing it.

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