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Relevance and Importance of Supply Chain Management

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25th Feb, 2021
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Relevance and Importance of Supply Chain Management

How important is supply chain management in the current industry?

This article will help you find the answer to this question as we’ll explore the relevance and importance of supply chain management in multiple industries, including automotive, pharma, manufacturing, and E-commerce.

What is Supply Chain Management?

To understand supply chain management’s relevance and importance in different sectors, we must first understand supply chain management. Supply chain management is the amalgamation of key business processes across the supply chain to create value for the stakeholders and customers.

It focuses on making the supply chain more efficient and effective by observing, modifying, and improving. Every industry has a supply chain and, therefore, requires the expertise of SCM professionals. Supply chain management handles the movement and storage of raw materials, inventory, finished goods and end-to-end order fulfilment. Read more about the advantages of supply chain management.

In other words, supply chain management handles the entire production flow of a good or service, from the beginning to the end. Manufacturing, farming, packaging, design, and transportation are vital aspects of supply chain management.

Supply Chain Management in the Automotive Industry

The implementation of supply chain management in the automotive sector is called the automotive supply chain. Here, the production starts from procuring the requirement parts, assembling the engine, designing the display, etc.

Another essential section of supply chain management in the automotive sector is operator and equipment management. Every operator present in the assembly chain should know what component they work with and where it goes (vehicle).

Thus, it is the production department’s responsibility to ensure that such necessary information is made available to every operator.

Supply chain management becomes crucial in the automotive sector as a failure in even one section can result in a flawed product, causing heavy losses to the manufacturer.

The availability of production parts is also a vital aspect of the automotive supply chain. The procurement services for these parts must meet customer satisfaction, and any variation in-vehicle components should come with the necessary preparations.

Vehicle manufacturers have to ensure that they keep their spare parts available for customers with discontinued or obsolete vehicles. The final aspect of automotive supply chain management is storage and warehousing.

Storages and warehouses in the automotive industry must meet the international standard, so the demand for proper supply chain management is considerably high in this sector.

Supply Chain Management in Pharma

Supply chain management in the pharma industry has evolved substantially in the last few years. The recent pandemic and the current vaccination drive are testing the pharma industry’s supply chains’ limits.

However, apart from combating the pandemic, the pharma industry faces multiple unique challenges which can solve only through supply chain management.

The COVID-19 pandemic put the pharma industry’s international supply chains to the test. As every nation races to vaccinate as many people as possible, the need for efficient and fast supply chains has risen considerably in the pharma industry.

Countries with proper supply chains can produce more vaccines and transport them more effectively, allowing them to reach more people.

Some additional challenges the pharma industry faces are:

1. Temperature Controlled Logistics

Many pharmaceutical products require temperature-controlled transportation. That’s because a temperature change can affect their composition and shelf-life. This issue becomes more prominent in international pharma as the distance between the endpoints is considerably high.

2. Qualifications of the Suppliers

The qualifications required for a pharmaceutical supplier matter a lot. An unqualified supplier can cause numerous problems to arise. They may supply the wrong product, or worse, provide a flawed product. The need for scrutiny increases considerably more in the pharma industry.

3. Time Sensitive

At the lowest level, the speed of delivery matters a lot in the pharma industry. Pharma companies and their logistics partners should be able to deliver products as quickly as possible. They must also be preparing for unique instances and demands. For example, during the pandemic, sanitisers and masks’ need had risen substantially, causing shops to run out of stock.

Supply Chain Management in FMCG

FMCG stands for Fast Moving Consumer Goods. They include packaged food, beverages, over-the-counter medicines, toiletries, stationery, personal care products, cleaning products and less expensive consumer electronics such as headphones.

These products have low prices, and they sell quickly, thus the name “Fast Moving”. These products’ lifespan is very short and has to be sold or replaced within a few months, weeks or even days.

1. High Volume, Low Margins

The demand for Supply chain management in FMCG, India, is probably the highest because an FMCG company’s profits depend on the volume of goods they sell. If the production and delivery of products were too slow by industry standards, the consumers would prefer the competition’s products more, causing the company’s profits to decrease.

The margins on such products are relatively small, but the net profit is high due to their high sales volume.

2. Competitiveness

The FMCG sector is among the most competitive ones. Every product category has multiple companies competing for the same market. In such cases, effective SCM ensures that the company’s products reach the distributors and retailers promptly to get ahead of the competition.

3. Wide Distribution

Supply chain management in FMCG must focus on wide distribution. As an FMCG company’s revenue depends on the volume of the products it sells, it becomes imperative to reach as many people as possible. That’s why they must have extensive and robust supply chains.

Supply Chain Management in Manufacturing

A considerable aspect of the manufacturing industry is the proper supply chain management. Here are the primary benefits a manufacturer would entail with good SCM:

1. Raw Materials

Delay in delivering raw materials and inadequate inspection of arrived material can lead to multiple issues and disruptions in manufacturing industry operations. Not only would it waste their time, but it would also increase their financial losses. Supply chain management would help them in avoiding these issues and reducing their chances to a minimum.

2. Reduced Costs

Effective SCM implementation would allow a manufacturer to mitigate production and distribution delays, making them more efficient and reducing operating costs. For example, with proper supply chain management, a manufacturer can determine the optimal transportations for their raw materials that take the least amount of time to deliver.

3. Better Customer Satisfaction

When a manufacturer follows a strict and precise supply chain, meeting deadlines will become much easier for them accordingly. Although customer satisfaction is vital for any business but manufacturers, it becomes a more significant factor because they usually get B2B clients (Business to Business).

A proper supply chain would allow their customers to place their orders more efficiently and customise their products when needed.

Supply Chain Management in E-Commerce

Another industry where a business’s success depends mostly on its supply chain management is E-commerce. An E-commerce enterprise focuses on product configuration, logistics, suitable infrastructure, secured payment gateways, and transport.

One of the biggest reasons behind the vast success of Amazon in the E-commerce industry is its innovative supply chain management. Here are some critical sections of supply chain management covers in E-commerce:

1. Reverse Logistics

E-commerce stores have to focus on maintaining an effective reverse logistics system. A reverse logistics system plans and executes goods’ movement from the consumer to the point of origin.

Managing and handling returns properly are some of the most important aspects of any E-commerce business. The SCM structure, therefore, should be designed accordingly.

2. Inventory Management

E-commerce stores don’t have to hold their inventory like a traditional business. Instead, they outsource this task to another enterprise, which allows them to reduce the risk and charges of maintaining their inventory.

They must keep a close watch on their inventory to prevent any issues with customers and future orders.

Conclusion

As you can see, supply chain management is a vital aspect of many industries. From car manufacturers to online clothes retailers, nearly every enterprise requires reliable SCM implementations for its business.

If you’re interested in pursuing a career in supply chain management, you should join our Global Master Certificate in Integrated Supply Chain Management. upGrad offers this course in partnership with Michigan State University.

The course is completely delivered online. Considering that MSU ranks #1 in supply chain management, students get the exclusive opportunity to learn from top mentors and instructors in the field. What’s more is that they enjoy many other perks like live learning & interaction sessions, 360-degree career assistance, interactive quizzes, case studies, interview preparation, resume feedback, and career counselling.

What other industry do you think relies heavily on supply chain management? Share your answer in the comment section below.

Learn Supply Chain Analytics Courses online from the World’s top Universities. Earn Masters, Executive PGP, or Advanced Certificate Programs to fast-track your career.

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Sandeep Pereira

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Responsible for working with the various teams and other management to establish long-range goals, strategies, plans and policies and set up new programs at upGrad. With a demonstrated history of working in the EdTech industry.
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