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  • Dhruman Gohil

What is Supply chain management and it's importance?

Updated: Mar 20, 2022

The supply chain is the alignment of different stages from the raw material to the final stage in which the product reaches the end customer.

The supply chain not only contains Manufacturers and Suppliers but also contains different stakeholders such as logistics providers, distributors, retailers, and the customer itself.

The term supply chain is usually not used in the internal process of companies but in the companies where there is a dependency of various companies/stakeholders to fulfill the orders.

A good and structured supply chain not only streamlines the operations but also

1. Reduces the uncertainties in day-to-day processes.

2. Helps in decision making and avoids losses.

3. Improves transparency and visibility for the stakeholders as well for the customers.

4. Helps to plan the inventory of various requirements.

5. Improves employee efficiency and structure high performing KPI (Key Performance Indicators)

The 5 major factors of the supply chain which helps companies to structure and plan are:

1. Production:

  • What product does the market want?

  • How much quantity should be manufactured and till when?

2. Inventory:

  • How to segregate storage of raw materials, semi-finished goods, and ready goods?

  • How to plan the warehouse stocking distribution to reduce efforts, uncertainties, and quick logistics?

3. Location:

  • What are the most efficient locations based on the distribution networks of the chain to reduce time, costs, and manpower?

  • How to optimize routes based on delivery orders based on their schedule?

4. Transportation:

  • What transportation mode should be selected based on the quantity of order, profits, costs and time required, and the delivery location.

5. Information:

  • How much data can be collected on a real-time basis and how can it be utilized to make decisions?

When all these factors are considered properly then it helps organizations to manage their supply chain effectively. The main aim to work on supply chain management effectively is to increase efficiency by reducing inventory liabilities and operating expenses with the help of structured processes.


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