If you have heard of strategies to control cost of operating businesses, and have been doing online research before, you probably have come across the term: supply chain strategy. Whether in a small or large company, you might have experienced a rough time at your specific station of work owing to factssuch as; the product to be delivered is out of date, or it is far away from meeting the required paper work for it to be cleared. On the other hand, it might be that a potential client has fallen out for a rival company’s product.
What is a supply chain and what role does it play in cost management?
First, let us familiarize with the term supply chain. According to one definition, a supplychain is an operation system involving companies and their suppliers to meet a market’s demand by producing and distributing specified commodities and services.
From one end lies the producer, and the consumer to the far end. In between, a number of activities, personnel, bodies, resources and data pull efforts together to ensure goods and services reach targeted clients. Strategic planning is necessary for supply chain to reduce a company’s operation costs.
How is a strategized supply chain important in your business?Consider four ways.
- It brings aboutcompetitive advantage
- Elimination of redundant steps
- Boosting client service
- Enables outsourcing of services
Competitive advantage
It is a common practice in many institutions to reduce the prices of their products aiming at out competing businesses that give similar or the same goods and services. Most who compete in that manner put themselves in unnecessary risk situations. With the constantly changing local and global market that we see today, situations can happen that worsens instead of bettering the operation of the decision taken.
For instance, in situations where inflation strikes the market affecting the product’s consumption hence the cost of operation. This in most cases is raised above projected values. In such cases, the funds required to run the business after one lowers the price of commodities imposes limitations on how much a drop in price one can go. Hence lowering the prices of goods and services does not offer a feasible solution. It might work for a while but later you might be forced to revert to the initial price.
Moreover, the pressure from operational cost brought in by lowering prices affects running of the business, which is slowed down due to low sales.
Instead of going down such a tragic path that would jeopardize your business, a better option to turn to is to organize a strategic supply chain. An efficient supply system, right from production, shipment, product distribution to wholesalers and retailers, and eventually the customers is needed to outcompete rival businesses.
Once the management in supply chain ensure formation of a steady and efficient distribution system, and sees to it that everything is timely carried out as planned, you can be sure of your product taking a firm hold of the market. This is practical especially when other factors remaining constant to all the businesses, customers will prefer services from a company that delivers the fastest. If that firm in question is rated, it has a higher competitive advantage than others do in the same industry. The business is therefore in a better position to reach its full potential and realize more profit.
Elimination of redundant steps
An efficient supply chain is one designed in a manner that it develops, maintains and enhances its own values and the customer’s as well. The most vital element of any business is the consumer. It is important to not only understand but also satisfy client’s needs because it is on them that the company centers its reason of operation.
Potential consumers are an important part that are targeted by the supply chain. To ensure that no interference exists in between the production and the consumer, redundant steps are supposed to be eliminated.
Redundancies have existed in traditional processes in which operations have been carried out in a decentralized style. Each stage of the chain has been independent of the other. A lot of time has been consumed when moving from one stage to the other.
The situation is even worse in cases where the product has to go through paper work and confirmation before approval at each stage, with each juncture having a pile of papers to deal with. This slows down operation process. A supply chain is important here because it removes unnecessary steps to ensure that time at work is assigned to the most important procedures.
Boosting client service
Another advantage of eradicating redundancy is that it allows clients receive quality service. The supply chain management in the modern industry is playing a key role in helping customers get services in time.
Technology has replaced manual procurement procedures. Orders are now made digitally instead of spending precious time on the road to go and drop a hand filled or written decrement. This has helped reduce by large the cost of travel back and forth offices to make or drop orders. This requires a good digital inter-chain relation to run the business efficiently.
Enables outsourcing of services
This is important in areas where the company needs experts to work on their items for increased quality production. As such, specialized personnel who has a good overview of what the market expects is hired. The company has a right to demand for quality work.
It can also take advantage by allowing few employees to be trained by such professionals. Outsourcing helps the company meet its goal in reducing costs by hiring a person in the field required to render efficient services and within a stipulated time.
The Bottom Line
The costmanagement team plays a vital role in ensuring a swift supply chain flow. They finance and manage the production and dispensation of goods and services. Their concern in supply chains is finding appropriate projects and implementing them perfectly.
Focus is also vested on planning, making estimates, drafting budgets, funding and controlling the operations of their projects. Improving the efficacy of the supply chain is core to meeting the market’s demand and keeping the company in operation.
