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19 Important Objectives of Supply Chain Management

Supply chain management has some key & important objectives which are also applicable for International Logistics and Supply Chain management. The main objectives of Supply chain management are to reduce cost, improve the overall organization performance and customer satisfaction by improving product or service delivery to the consumer.

Key Elements of SCM

Supply Chain Management is consists of all business partners or parties involved in the fulfilment of a customer. This includes Manufacturer, Marketer, Suppliers, Transporters, Warehouses, Retailers and even customers. Their involvement may be direct or indirect.

Supply Chain Management involves Movement and Storage of all materials including:

  • Raw Material
  • WIP (Work in Progress)
  • Finished Goods.

Objectives of Supply Chain Management

Below are the 19 important objectives of Supply Chain Management (SCM)

1. To maximize overall value generated

  • Higher SCM profitability, higher success: The higher the supply chain profitability or surplus, the more successful is the supply chain.
  • The supply chain profitability is the difference between the amount paid by the consumer to purchase the product and the cost incurred by the organization to produce and supply the product to the customer at right time.
  • Profit = amount paid by the customer – total cost for the company

2. To look for Sources of Revenue and Cost

  • There is only one source of Revenue i.e. customer. 
  • Appropriate management of the flow of information, product or funds is a key to supply chain success.

3. Replenishment of the Material or Product whenever required

  • Replenishment means the restoration of a stock or supply to a former level or condition.
  • Whenever necessary, management or marketer may think replenishing the material or product.

4. Cost Quality Improvement

Another important objective of supply chain management is to achieve cost quality balance and optimization.

5. Shortening the time to Order

Reduced order time: Supply chain management helps to reduce the time required for ordering and fulfilling the same

6. Speedy delivery

With proper supply chain management, marketer or distributor can supply products or material to the market with faster speed.

7. Delivery optimization

To meet consumer demand for guaranteed delivery of high quality and low cost with minimal lead time.

8. Efficiency

Supply chain management improves the efficiency of the supply chain at all points.

9.  World-class performance

SCM helps to achieve world-class performance.

10. More awareness

SCM can help to achieve more awareness of supply chain dynamics and efficiency

11. Demand Fulfilment

Managing demand and supply is a key and challenging task for company or management personnel. Supply chain management plays crucial role in the fulfillment of customer demand through efficient resources

12. Inventory Optimization

It also beneficial to optimize pre-production and post-production inventory levels

Inventory means stock: inflow and outflow of the stock for production purpose

13. Business Characteristics

Careful study of companies micro and macro level supply chain management can provide good understanding of business characteristics

14. Flexibility

Well managed supply chain provides flexible planning and better control mechanism.

15. Transportation cost optimization

Minimized cost: Supply chain management helps to reduce or minimize the transportation cost.

16. Efficacy

More efficiency and efficacy: Supply chain management is like a boon for Greater labour efficiency, equipment and space efficiency.

17. Better Distribution

Improved distribution: Supply chain management can maximize the efficiency of the distribution side. Marketer or distributor can achieve an optimized level of distribution by utilizing all available resources properly.

18. Cost Reduction

Cost reduction: SCM helps to reduce the system-wide cost of the company to satisfy service level requirement

Company costs: Manufacturing, Fixed assets, inventories, transportation

Service levels: Response time Hrs/day/week/month

19. Better Decision

SCM helps top as well as middle level management in better decision. It can be used as a strategic management tool for competitive advantage.

The Bottom Line

If company or manager understands the importance and benefits of supply chain management, it can be used to improve overall business performance and to gain competitive advantage. And most importantly, all these achievements can be done without sacrificing the desired level of customer service.

Books Referred

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