Critical business reasons for effective supply chain management

Business Reasons for Supply Chain

Business Reasons for the Supply Chain Management

There are many factors or reasons why companies choose to invest in and grow their supply chains over time. The intent of this paper will be to analyze the most common reasons why supply chain management is such a critical part of any business strategy today. Managing supply chains effectively can mean the difference between launching a new product on time and at a high quality level

(Amini, Li, 2010), in addition to managing high variability in demand for a given product or service as well (Georgiadis, Tsiakis, Longinidis, Sofioglou, 2010). Supply chains are indispensible for managing any business effectively, across all manufacturing and service sectors.

Better Demand Management

Supply chains are a critical part of the complete value chains of a business and often the make the difference of their being able to fulfill demand or not (Barrett, 2007). For supply chains to deliver the maximum value possible, they need to be structured in such a way as to be demand-driven, where customer demand dictates build rates, order rates, forecasts and supplier coordination. A Demand Driven Supply Network (DDSN) is essential in industries that have very high inventory turns including high tech electronics and consumer packaged goods. For any manufacturer or service provider in these industries, having a DDSN-based supply chain is essential if they are going to succeed over time.

Another aspect of managing demand within supply chains is the need to take into account high levels of fluctuations in orders and customer requirements on a seasonal and per customer segment basis (Georgiadis, Tsiakis, Longinidis, Sofioglou, 2010). The DDSN framework provides supply chain managers with the ability to anticipate and respond quickly to the needs of customers while also stabilizing their supply chains from volume-based disruption over time (Barrett, 2007). As many industries are going through a fundamental re-alignment today, the need for having more effective supply chain practices is critical. The role of supply chain management is to smooth out the peaks and valleys in demand, ensuring the entire business operates profitability and predictably.

Cost Reductions by Greater Efficiency