What is supply chain management and why is it important?

7th Nov 2017

Supply chain management is a system used by retailers to ensure products complete their journey from start to finish, beginning with the obtaining of raw materials and ending with the efficient delivery of the final product to the buyer.

Supply chain management is a system used by retailers to ensure products complete their journey from start to finish, beginning with the obtaining of raw materials and ending with the efficient delivery of the final product to the buyer. Effective supply chain management ensures products are delivered as quickly and as cheaply as possible, without sacrificing on quality.

Good supply chain management boosts customer loyalty

Supply chain management is important because customers value fast service. Today’s vast retail sector relies on customer availability as a key sales driver, so providing accurate and efficient services to retail stores is a key part of the supply chain process. Once word gets out that a company has impressive timeliness and responsiveness, it will help attract more business, increasing the output and sales for the company.

Having an efficient supply chain can also help retailers reduce operating costs and improve financial position. For instance, quick delivery of expensive products can help retailers avoid holding onto costly inventories any longer than necessary. Furthermore, reliable delivery of materials to assembly plants avoids any costly delays in manufacturing.

Poor supply chain management can be detrimental to business

A faulty supply chain can have a detrimental effect on a business. In 1999, Toys “R” Us promised their customers that all online orders placed before December 10 would arrive in time for Christmas. However, the retailer’s computer software was not equipped to handle the high amount of traffic that it received. Consequently, thousands of online orders did not make it in time for their customers.

It was a PR disaster for the American toy retailer, who received a $350,000 fine from the Federal Trade Commission along with thousands of angry calls and emails from dissatisfied customers. Toy “R” Us later announced a joint online venture with Amazon, due to the e-commerce giant’s distribution capabilities and internet expertise. Amazon continues to dominate the retail market because of their innovative and reliable supply chain.

How to ensure efficient supply chain management is sustained

Having a strong team of expertly trained managers along the supply chain is essential. Their understanding and experience with suppliers and contractors for various products and services is invaluable. It may also help to establish alliances with key suppliers to ensure the production always runs smoothly.

Supply chain auditing is also important because any unnecessary steps can be eliminated and cost saving opportunities can be identified. Auditing will help sustain supply chain reliability as identifying patterns can help retailers work towards improving customer services with higher efficiency.

Additionally, inventory management software such as Radio-Frequency Identification (RFID) can help boost supply chain efficiency. At OCS Retail Support, we provide RFID solutions that enable retailers to monitor stock availability and popularity. This can help in the auditing process, identifying materials and products that might be adding unnecessary costs in the supply chain.