In recent years, the supply chain has become central to the organization of any successful manufacturing or commercial enterprise. The efficiency of supply chain management in an increasingly competitive market often determines the success of a business. It is no coincidence that in recent years, companies have equipped themselves with a supply chain manager, able to improve the company’s performance. Therefore, in this section we will explain what the supply chain is and why it is so important in business management.
Supply chain definition: what is the supply chain?
Before going into the meanders of supply chain management, let’s try to provide a definition of the supply chain. Let’s try because, as is often the case in these cases, there is no single definition. The literal translation of the supply chain, which in Italian would be equivalent to a distribution chain, does not fully reflect the complexity of the matter. Without going into it too much, however, the definition that, more than any other, returns the meaning of what the supply chain is, is that formulated by Professor John Thomas Mentzer:
«Supply chain management is a systematic and strategic coordination of traditional business functions and tactics, first within each company and then along the various members of the distribution chain, with the aim of improving the long-term performance of individual members and the entire chain».
A simpler, but nevertheless complete, definition is that provided by Professor David Simchi-Levi:
«Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, so that the goods are produced in the right quantities, in the right places and on the right time so as to minimize overall costs while meeting the requirements in terms of service level».
The supply chain, therefore, is not a process that is – as is often mistakenly believed – about logistics alone. On the contrary, it is a much broader process, involving many areas, not only within the company, but also outside it. This means that the supply chain is no longer just about the company’s internal articulations, but also about suppliers, contractors and even customers. The supply chain, therefore, can be seen as a kind of collaborative pact, which aims to improve the performance of the company.
The objectives of the supply chain
The complexity of the supply may lead to the question of why there is a need to integrate it into business processes. In fact, integrating efficient supply chain management into your business dynamics allows you to pursue certain goals that are essential to any successful business:
- reduction of costs: the main objective of the supply chain is to reduce costs, both of production and distribution, in order to acquire greater competitiveness on the market of reference;
- Improvement of customer satisfaction: the second fundamental objective of the supply chain is to improve end customer satisfaction, reducing waiting times and improving product quality.
It is clear, therefore, that the objectives of the supply chain coincide with the interests of a business management, which aims to maximize profit. It is no coincidence that integration with supply chain management provides many benefits.
The benefits of supply chain management
The benefits of supply chain management are numerous, as mentioned. The more this strategy achieves its objectives, the greater the benefits will be derived from it. All, in the final analysis, can be summarized as follows:
- reduction of the working capital: the ability to intercept the demands of the market, in virtue of an efficient management of the supply chain, involves, as secondary effect, the reduction of the supplies and therefore of the invested capital in expectation of return;
- increase in revenues: the second benefit deriving from the optimisation of supply chain management concerns the increase in revenues that the company can achieve, thanks to cost reductions that can vary between 10% and 40%;
- Improved market perception: Efficient supply chain management reduces costs, improves delivery times and customer management, ultimately improving market perception.
These, in principle, are the principles of the supply chain. The literature on the subject, however, is extremely vast and,moreover, constantly evolving. A very interesting topic, for example, is the role that the blockchain can play in the supply chain in the near future. Continue to follow us for more information.