Supply chains are the lifelines of businesses across the globe. They connect all of the processes required between the manufacture and the final delivery of a product to a consumer. So, in a nutshell, they are vital to nearly every economic system out there. However, these complicated business organisms need constant management and attention to stay healthy and competitive. Luckily for us, the benefits of supply chain management and the software suites designed to convey these advantages are widely available.
What Is Supply Chain Management?
Supply chain management, put simply, is actively managing the many moving parts of a supply chain while aiming for maximum customer satisfaction, lower costs and competitive advantages. In the past, each section of a supply chain was a self-contained problem handled by those that directly interacted with it. Nowadays, the supply chain is, correctly, viewed as an interconnected series of pieces that work together to manufacture and deliver products to customers accurately and quickly.
In fact, a recent study shows that nearly 70% of supply chain officers believe that by 2020, supply chains will be a key driver of better customer service. Luckily, modern supply chain managers have better options than pen and paper or other analog methods to attempt to bring organization and efficiency to their operations. The rise of SCM software benefits everyone as these systems take much of the complexity out of optimizing a supply chain.
Supply chain management software systems do a lot for businesses in industries across the world. SCM tools can automate much of the physical supply chain process and provide analytics and business intelligence for growth. Supply chain management systems help human leadership teams fine-tune business operations and make them as efficient and effective as possible, for a competitive advantage in a particular industry.
As you can tell, supply chain management system benefits are numerous and beneficial.
The Many Benefits Of Supply Chain Management
Let’s get down to the reason we are all here, shall we? Here are some of the ways adopting an SCM system can benefit your supply chain:
Better Flow of Materials, Products and Information
Supply chains are all about flow. Put simply, supply chains are always chasing after shorter times between manufacturing a product and getting it out to the customer that ordered it. Achieving this requires quite a few variables that must also be running at maximum efficiency to get these delivery times down.
For example, the quality of materials used to manufacture the final customer-facing product is one such consideration. Not only that, but supply chain officers have to keep in mind demand fluctuation, inventory space and organization, how to effectively ship their goods and how to keep costs as low as possible. That’s quite a few plates to keep spinning all at once, and when one falls, the rest suffer.
On top of that, the flow of information across a supply chain needs to be smooth as well. Inefficient or fragmented communication in a supply chain can lead to costly issues, poor customer service and damaged supplier relationships. We’ll cover this more in-depth, but data visibility is another vital part of successful information flow and is critical to diagnosing problems as well as planning for the future.
SCM systems contain all of the tools and features necessary to strengthen the flows of information, materials and products across a supply chain. From communication enabling features like chat capabilities and real-time shipping notifications to analytical tools that give managers critical data, SCM systems have them all.
Improved Data Visibility
Analytics has recently become the talk of the town in the world of supply chain management. In fact, most SCM software systems contain features that drill down into the daily processes of a supply chain to give decision-makers information on underperforming areas and what to expect in the near future in regards to demand.
These features give users a number of different analytical strategies to employ depending on the size, output and complexity of the supply chain in question. Some systems take it a step further and provide cutting edge forecasting tools that can give demand insights in real-time.
Analytical tools are attractive, but if a company is not able to act on the insights provided by these features, they can cause more trouble than they are worth. A messy jumble of data being stored and never acted upon doesn’t help anybody.
Enhanced Financial Practices and Cost Cutting
Having an uncomplicated and efficient flow of information and goods is important, but financials make the world go around. Improving cash flow is a common sticking point for many supply chains. Luckily, SCM software benefits include strong accounting features that can help work out the kinks in these processes.
Automating manual tasks not only helps save money on the floor of a warehouse but also in the accounting office. Removing tedious manual entry of important accounting information can lead to fewer errors and more accurate billing practices. Many systems provide single-entry data input that carries a single input throughout a complicated accounting document. This way, human employees don’t have to mindlessly calculate, recalculate and input data while trying to keep their figures perfect.
According to this study, supply chain management software can help handle some popular pain points in many supply chains. Some of these include the unreliable flow of cash due to slow information and costs associated with compliance.
One of the biggest pieces of supply chain management software is the evaluation of supplier relationships. Many supply chain management systems contain features that allow users to compare supplier costs and support structures. These operational benefits allow supply chain managers to make meaningful choices on which suppliers to form partnerships with.
A transparent view of what vendors charge, how they support products and how they deliver gives companies the chance to see if a certain supplier is a good fit. This can help save a great deal of time when it comes to settling on a new supplier.
It’s important to note that a whole new set of software solutions has sprung up called supplier relationship management software. However, in many cases, conventional SCM solutions contain much of the same kinds of functionality that aids companies in getting a competitive advantage while managing and improving vendor relationships.
A Distributed Footprint
Most businesses of a larger size have enormous volumes of materials and supplies flowing around multiple locations.
When supply chain complexity is too much for managers and others to assess through a simple spreadsheet or document, supply chain management software helps to order and organize these processes. This way, decision-makers can see at a glance how much of something they’re getting, where it’s coming from and how they are using it. In a sense, SCM software breaks down massive amounts of supply shipments into something that company leaders can peruse in detail.
Lean Inventory and On-Demand Supply Chains
It’s often been said that SCM doesn’t focus on internal inventory, but comprehensive supply chain management software will often include tools for managing inventory. Many SCM systems have the kind of functionality that allows managers to pursue a lean inventory or on-demand model.
Rather than having to stock large volumes of incoming supplies in a warehouse, managers can craft precise supply schedules and cut back on storing an excess of unneeded inventory. Having enough inventory to meet demand is critical, having too much inventory devours valuable warehouse space and uses resources to hold.
More precise on-demand systems have helped many companies close warehouses, save real estate space, and cut costs by enormous margins. That’s one of the biggest benefits that supply chain management tools offer to businesses — they actually allow more capable operations on a smaller footprint.
With the rise of cloud-based computing, maintaining software and complicated IT infrastructure can be taken out of the equation. Updates and upgrades to your SCM system are available in real-time without slow-down or costly time spent upgrading station after station.
Not only that, but as technology continues to improve, we see helpful additions like mobile access being included in more and more systems. Now, supply chain managers can be on the move while still being connected to the vital processes of the day.
In the past, smaller businesses would have been unable to access these supply chain management system benefits for one simple reason — they cost too much. Small businesses had to rely on simple tools such as Excel and MS Project, to handle all of their planning, information and financials. Meanwhile, larger companies took their supply chains to the next level with comprehensive software suites and helpful cost-cutting tools.
However, with the rise of cloud-based deployment strategies, small businesses can gain the competitive edge of SCM systems without the sky-high introductory costs. Many cloud-based systems provide monthly subscriptions instead of large upfront payments to use them. This way, small businesses can gain a competitive edge, even against some of the bigger businesses out there.
The connectivity potential of cloud technology also allows for never-before-seen flexibility to “plug-in” new parts of the system. It’s easy to introduce new elements to the supply chain using cloud software, and adding new partners or suppliers has become a nearly automated process, especially when compared to on-premise solutions.
The top supply chain management software solutions all have a seamless UX design that allows you to easily integrate new people and processes, as well as do deep customization for different segments of the market.
Liability and Risk
Supply chain management software also often works in conjunction with other systems, like enterprise planning tools. These systems can work in concert to handle important tasks like liability and risk assessment.
Businesses have to assess risk and liability in the right ways before moving forward with a plan or adjustment. All known and unknown quantities have to be accounted for before big changes can be put into place. Otherwise, the investment may not be worth it. Supply chains deal with numerous risk factors that can affect the bottom line. Some of these include workplace safety, product quality and forming relationships with new suppliers.
In many of these cases, looking at the data and analysis presented by supply chain management software can give managers clues about where risks might lie. This will help with risk mitigation and liability coverage, whether it’s through insurance policies, crafting new work processes, delivering health and safety resources to workers, or other protective strategies.
Now that we have covered some of the more stand-out benefits of supply chain management software, you’re probably wondering how to adopt a system. Luckily, we have some advice that can make tracking down a solution a bit less painful.
If you’re already comfortable with the topic and are ready to get down to the brass tacks, check out our comparison guide for a look at some top market contenders.
How to Choose an SCM Solution
You’ve seen the benefits and you are ready to turn your supply chain around, but how do you pick the right system for your company? Don’t worry. At some point, everyone feels a bit lost when they first see the expansive market of SCM vendors out there. Before getting overwhelmed and picking a system with a large price tag, here are some questions you can ask yourself and vendors to narrow the field.
How much room is there in the budget?
Always consider your resources before committing to a big expenditure. If your business is smaller, make sure your unique requirements are at the top of your mind. Your solution shouldn’t break the bank with needless complexity. Find a system that suits your income and that can grow alongside your company. A big price tag doesn’t mean a system is a must-have; no solution is a one size fits all answer.
What type of deployment do you need?
On-premise or cloud-based deployments come with their own advantages and disadvantages. However, the cloud is growing in popularity for good reason. Lower cost of entry, nearly unlimited storage, ease of access, mobile features and real-time upgrades make cloud-based systems very attractive. If security if the name of your game, on-premise solutions are hard to beat.
What type of support and training is offered?
This is an important topic to cover with a vendor before you decide on their system or not. Always ensure a vendor has a strong history of support. You don’t want to be left high and dry if something goes wrong. Not only that, having multiple avenues of training can help get employees up to speed on a new system quicker. Many vendors provide certification classes that not only expand a user’s knowledge base but make for great inclusions on a resume.
The benefits of supply chain management and SCM systems are readily apparent. These days, moving forward without a system in place is nearly unheard of, and for good reason! Don’t let your supply chain fall behind, and gain some peace of mind thanks to the many benefits of a strong supply chain management system.
How have the benefits of an SCM system helped optimize your supply chain?
Let us know with a comment below.