Supply Chain Advantages

A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, through to its eventual delivery to the end user [1]. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer [2]. Some supply chain systems allow used products to re-enter the supply chain, at any point where residual value is recyclable. For example, failed products within warranty returned by customers, with return merchandise authorization (RMA) that needs reverse logistics. Supply chain management (SCM)

By implementing supply chain management systems, organizations can optimize their operations by reducing waste and minimizing overhead costs, meeting inbound and outbound shipping schedules in a scientific way. Benefits of such systematic approach improves performance in different areas ranging from product quality to order turnaround times. Some of the key benefits of supply chain systems can be summarised as:

Inventory Control: Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the ‘bullwhip effect’ and avoid underproduction [7]. Bullwhip effect refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain, resulting in revenue loss, bad customer service, high inventory levels and unrealized profits.

For example, Procter &Gamble (P&G) noticed this effect more than a decade ago that increased inventory disposable nappies based on incorrect sales

Risk Mitigation: SCM systems help to identify critical risk factors in an organization or with their suppliers that help management to take appropriate corrective decisions to mitigate the risk. Without effective supply chain management systems, many companies are exposed to legal risks and liabilities.

For example, airfreight carriers such as DHL use SCM systems to identify risk of transporting dangerous or prohibited materials to countries under UN sanctions such as North Korea.

Lean SCM [9]: Cutting down non-value-added costs in customer point of view, essentially in a team-based approach is around in manufacturing. Recently that lean concept is being applied to supply chain &logistics management area.

Walmart’s SCM strategy is considered one of the best, with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved in-store variety and selection, and highly competitive pricing for the consumer