Benefits Of Effective Supply Chain Management

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Return on assets is the basic measure of how efficient is any organization is operating. Which measures the efficiency of how the business is using it’s assets to generate profits. For any firm, the biggest benefit of effective supply chain management is inventory and order control. One of the benefits of the SCM is Inventory control. When a firm faces a shortage of one of the products, which is of direct or indirect relation of product served to customers, it means not being able to satisfy a customer. In other words, it means losing customers. Which reflect less revenues and profits. In result, eliminating stock shortage boosts revenues, which in turn boosts profits. On the other hand, carrying more inventory than necessary requires more…show more content…
It involves the cooperation and coordination of activities of all parties for the production and distribution of products to the final consumer with mechanism in place to optimize inventories across the entire supply chain. (Haan, et al.,2003; Viswanathan and Piplani, 2001). Effective management of inventory has a vital role in a firm’s ability to operate with a good profit margin. High inventory turnover ratio indicates that the organization is managing its inventory efficiently with high sales rates. While having low inventory might often result in not being able to meet committed service levels. That’s the reason behind the importance of efficient inventory management and its significance in efficiently managing Supply Chain. The inventory management has helped enterprises through optimization and coordination. It allows optimizing the link between SCM and inventory to reduce costs. (Importance of Inventory Management in SCM, 2017). Inventory is a key to profitability. It turns assets into profits. The faster it turns the greater the profit will be. The purpose of supply chain management is to reduce inefficiencies. Specifically excess inventory. Since uncertainty is difficult to forecast, collaboration between entities helps reduce uncertainty for faster ability to respond and change. More knowledgeable about inventory is where in the SCM. From purchase orders and customers to distribution centers, the better inventory can be managed. (LTD Management, 2017). Any change is the inventory would affect SCM efficiency. It’s one of the drivers of SCM performance, which must coordinate with other drivers. The relation between SCM and inventory management is the ability to know the time it takes for a product to flow through to reach end user. Its important also that managers

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