5 High-Level Goals of Supply Chain Management
Supply chain management. You know what it is and you’ve likely even implemented it into your own business. You know its value—upping performance and competitiveness—yet you also know there must be something more you’re missing.
That’s why we’re taking a top-level view into answering the questions:
- What is the purpose of supply chain management?
- What is the major business reason for implementing supply chain management?
- What are the goals of supply chain management?
- What is the impact of a well-executed supply chain?
- How can you achieve your supply chain management goals?
Avetta will answer each of these questions and we invite you to examine your own experiences, views, and ideas surrounding supply chain management and its potential impact on your organization now and down the road.
What Is the Purpose of Supply Chain Management?
The higher purpose of supply chain management is to take a complex scope of upstream and downstream activities and transform them into strategic capabilities, aligned processes, and stronger relationships.
Reaching this level of management has its challenges (many of which your organization has surely already encountered before), yet the resulting beneficial impact is worthwhile. As you set up an efficient fulfillment system, you must also build connections with a network of suppliers and buyers and set your enterprise up for fiscal prosperity.
What Is the Major Business Reason for Implementing Supply Chain Management?
From a purely business perspective, the major reason for implementing supply chain management is money. With every true improvement comes either a cost-saving or financial gain, both prompting higher net profits.
While there are many ways to increase profits (improving sales, introducing new products, etc.), improving supply chain performance yields the biggest return. How so?
The answer lies in decreasing the cost of goods sold that is associated with manufacturing a product. When factoring in logistics, raw materials, manufacturing, warehousing, transportation, tariffs, and labor, these expenses can easily climb as high as 80% of sales on an income statement. Reducing that percentage even a little can make all the difference in total profitability.
What Are the Goals of Supply Chain Management?
There are five high-level goals of supply chain management every top-tier organization should strive for.
- Reach a collaborative efficiency that makes automatically coordinating logistics possible for both suppliers and buyers.
- Deliver top value, high-quality products to end customers by recognizing the benefits of feedback and addressing any issues through win-win solutions.
- Promote long-term stability and sustainability through planning for and optimally undertaking every action, from sourcing cycle to order cycle, in order to thrive in meeting every customer need.
- Anticipate and leverage potential opportunities and threats so that adaptation is not only possible, but quick, seamless, and even productive and beneficial.
- Enable financial success (and curtail financial risk) by powering a reduction of inventory, labor, and logistical costs while also improving sales, gaining market access, and differentiating the brand.
If your organization can attain these goals of supply chain management, it’ll enjoy significant success as a result.
What Is the Impact of a Well-Executed Supply Chain?
A well-executed supply chain can have a prodigious impact as seen with a simple COGS calculation, as well as through a far-reaching causal sequence.
When it comes to the cost of goods sold, even a slight reduction can cause a profound effect, and not only because of direct costs. An optimized inventory that is nothing short of beautiful and flexible forecasts that can handle any predicament both work to lower COGS even further.
Meeting supply chain management goals also improves relationship development and positively impacts causal sequences, which end up lowering the following (each of which has a variety of causal sequences of its own):
- Inaccurate data
- Unanticipated fees
- Quality corrections
- Slower labor, transportation, inventory turnaround, and sales
- Safety, compliance, and financial risks
In the end, your organization will find itself swimming in sky-high customer satisfaction rates and soaring profits.
How Can You Achieve Your Supply Chain Management Goals?
Of course, the size of the supply chain impact is directly related to the ability your organization has to manage it. For your organization to achieve such lofty and complex supply chain management goals, you’re going to need some guidance, software, resiliency, and support.
Avetta’s world-class service does just that. Our specialists work directly with you to build a smarter, safer supply chain boasting the latest technology that gives clarity and confidence. We will help to improve safety, quickly qualify and vet suppliers, visualize opportunities and risks, and lower costs.
Partner with Avetta to meet your high-level supply chain management goals!
