Supply chain management is a competitive industry. Customers do not care what was involved with getting the product to the shelf. They want the product available at the lowest cost possible. The companies that manage the supply chain process wish to meet the customer’s expectations and wish to profit. Here are five ways for companies to understand the importance of effective supply chain management.

Supply Chain Management Involves Extensive Cost Reviews

A product purchased at the store results from multiple levels of production. The product will start as raw materials, formed, and manufactured at various levels and touch numerous other companies as the product works through the supply chain system. A portion of the raw materials used to create the product may come from foreign countries and lead to mass production at foreign facilities. As the product works its way through the system, a review of the shipment and production costs via a freight audit drives the cost analysis.

Supply Chain Management Touches Multiple Companies

As a company reviews the supply chain management process for efficiency and improvement opportunities, the company evaluates all companies involved in product development. The companies that struggle with supply chain operations can mistake focusing most of the attention upon their own companies without realizing the problems they encounter may be at a different stage of the supply chain. Some production problems are not obvious, and a thorough investigation is warranted. An ineffective supply chain will deliver higher costs and cause endless problems.

Supply Chain Management Utilizes Multiple Steps

A company that delivers a product to the store shelf goes through multiple stages of work across all internal departments and external companies. Each department involved will drive the roles of delivery. These roles can involve development, manufacturing, marketing, sales, technology services, and customer service. Every external company involved will take a piece of the cost, and there is only so much available before an increase in customer price. Payroll costs are an essential piece factored into the cost of production and the supply chain process.

Supply Chain Management Starts With Strategic Planning

Product development starts with a great idea on a marker board. As the concept begins to blossom, excitement grows to research the possibilities further and perform a cost-benefit analysis. The product may only involve a few steps in the supply chain or thousands. The most important decision is whether the product will fit the strategic approach and provide a positive economic return. The result of the decision to proceed with a product will be developing a target price.

Supply Chain Management Drives Efficiency

A supply chain management process achieves successful results from internal and external efficiency. When the supply chain meets its goals, all companies involved will succeed. When these companies can effectively scale their operations to meet customer demand and changing economic times, they will remain at the forefront of the supply chain. Other companies will want to join the supply chain to participate in the positive returns. Cost increases are inevitable but should not be due to inefficiency or mismanagement.

An organization that cannot provide the expected costs of production, logistics, and delivery will not find the success they seek in the global economy. Supply chain operations are a results-driven industry. An organization is only as good as its last delivery and the reputation they have established. A supply chain manager needs to understand the market and see the developing trends. Companies recruit and target a supply chain with the lowest cost and highest efficiency. Reputations of poor performance can sink a company and present a scenario where they will never recover.