Supply Chain Management - What is it, and how is it important? | Improving Supply Chain Management in India.

With the rapid burst of ecommerce platforms over the last few years, the necessity for an omni-channel supply chain has never been this apparent. As consumers are getting used to same-day delivery schemes, investment into developing supply chain infrastructure is becoming crucial to the success of any product-based-business.

This is further emphasized by the huge investments made by ecommerce stores, and supermarket chains like Reliance, Amazon and Dmart making significant investments into making their supply chains reach the nooks and crannies of the country, all the while making the chain resilient.

What lessons are there to be learned from their efforts? How important is your investment in SCM anyway? What are the benefits of Supply Chain Management that your business stands to gain? How do you improve your business' supply chain management in India?

Let's find out

 

Demand For Supply Chain Management

 

A robust, resilient supply chain is the biggest asset any nation can have. Properly built, robust supply chains are pivotal, as it essentially has a major impact (mostly in a direct sense), on all the other sectors of the economy. With the Indian economy facing major questions, thanks to the ongoing fight against the COVID 19 pandemic. Even minor disruptions and hindrances in the nation's supply chain can cause a huge ripple effect and have massive repercussions.

There used to be a time in India, where the lack of infrastructure, and the complexity of tax regimes acted as a major hurdle. However, with the introduction of GST in 2017, taxes became simpler, and India has leapt leaps and bounds in terms of infrastructure.

This has led companies like Amazon and Reliance to build robust supply chains, which has led them to capture a significant chunk of the market. These companies can consistently to satisfy the growing demands of the Indian consumers. In fact, we'd go so far as to say that effective SCM is they pivot point that maintains the balance between demand and supply.

 

Okay, Stop. Take a breath. What is Supply Chain Management?

Supply Chain Management, often abbreviated as SCM, is an elaborate system created and utilized by companies to manage and deliver products - starting from acquisition of raw materials, to the delivery of the final products to the consumer.

 

There are many components involved in SCM, varying from business to business, depending on how their system is designed. Some of these components include acquisition of raw materials, manufacturing, inventory management, management of demand and supply, product portfolio, apart from planning activities (like sales forecasting, planning, operations planning, etc).

If you're in the end-to-end product business, your supply chain is the single most important investment decision that you'd have taken.

Just how important you ask?

Why don't you take a look at some of the benefits your company stands to gain through effective supply chain management?

 

Importance of Supply Chain Management

A well-designed Supply chain system comes with several key benefits.

Reduction in Operational Costs

Retailers are enabled to procure resources efficiently, and products are manufactured promptly. This enables  businesses to run using the JIT model (Just in Time model), saving the business on unnecessary storage and inventory costs. Not only is monetary loss avoided, but precious time can be gained as well.

Improvement In Customer Satisfaction

The ultimate goal of any SCM is to deliver the right products to the customers in a timely manner, at the required location. Without having an efficient supply chain management system in place, it can be extremely easy for wrong products to be delivered to the customers, way past the required time. 

While it might be impossible for you to bring down that number to 0 (yes, even with a robust SCM, mistakes sometimes happen - albeit at a much lower frequency, and to a much lower degree), you'll be able to stay on top of the situation, and provide timely support to the consumers. This makes it more likely for the customers to be retained, and in some

 

Increases Organizational Efficiency

The Supply Chain is the single most valuable asset to most companies. Supply chain managers tend to evaluate present performance, optimize workflows and processes, reduce costs, manage inventory better, reduce the time taken for the product to be manufactured end-to-end (product life cycle), and help the company spot trends, and stay ahead of the competition.

Not only are the workflows efficiently managed, physical and human resources are also carefully analyzed to strike a balance between costs and desired levels of output.

SCM helps the company to maintain a healthy business relationship with all the stakeholders involved, ultimately padding the bottom line of your organization.

 

Improvement in Cash Flow

Despite having amazing profits, at one point or the other, it is very common for businesses to fall prey to poor cash flow management. Working capital management, and cash flow management have become straightforward with a clear system implemented to manage the supply chain. Not only are the products delivered on time, goods acquired on time, and production completed on time, cash is also made available as and when required, completing the cycle.

The reduction in overheads also contributes significantly to the cash flow optimization, as an added advantage.

 

Mitigates Risks

By analyzing the relevant supply chain data, potential risks can be spotted well ahead of time, allowing the business to come up with an action plan to tackle these risks. As mentioned in the introductory sections, minor disruptions can cause a huge problem not only for the company, but for the economy as a whole.

By spotting the potential risks ahead of time, businesses can proactively attempt to address the negative impacts.

Conversely, it also allows for businesses to exploit lucrative business opportunities, and allows them to proactively position themselves to take advantage of the shift in trends.

Alright. Alright. I'm sold. How do I Improve my Business' Supply Chain Management?

How to Improve Supply Chain Management in India?

Here are 7 key points to supply chain success in India.

 

Company Owned Inventory

One of the first things you should do when you're looking to improve your organization's supply chain is to take a look at the company owned inventory.

If you've managed inventories and taken a look at the associated costs, you'd know exactly how costly it is to hold and store inventories. It is essential that an adequate amount of inventory is kept in stock to ensure that stock out doesn't cause a major issue in the production schedule.

Studying the different factors, like the time taken for an order to be placed, and received, the daily consumption rates, and the maximum capacity of the floor, and the storage units will go a long way in reducing costs, improving efficiency, and ensuring that all the processes are done on time, every time - from procurement of raw materials to delivery to customers.

 

Optimizing the Distribution Network

Every supply chain starts out small, and is planned accordingly. However, as the reach begins to expand, the same distribution network might have redundant, or underperforming components. Sometimes, a better alternative that wasn't previously available to you, can be utilized now to ensure smooth functions.

Of course, all optimizations might simply not be worth the time, effort and resources. It is up to you to use your professional judgement to see which optimizations are worth it, and make sure they are implemented as quickly as possible. Usually, there are two methods properly used to improve distribution network.

1. Cluster Approach - Supply Chain Managers group charts, graphs, documents and other available data together. Usually, these clusters are influenced by geographic concentration - of suppliers, businesses and other associated institutions in a select field.

2. Holistic Approach - Supply Chain Managers review all the components of the distribution network, understanding synergy, and thinking about the entire network as a whole and not as an individual component.

Supply Chain Governing Body

Setting up a governing body to plan and control how the supply chains and distribution networks does wonders for your business. The intent is to create a new strategy, or align the existing strategy to the business' existing goals.

These bodies (some organizations call them councils, others call them boards - the nomenclature really doesn't matter) remove the different barriers within and outside the organization, all the while helping the business spot trends and opportunities that help the management to position themselves appropriately.

Tech, Tech and Tech

Honestly, with all the developments in the tech world, especially when it comes to the Supply Chain domain - we're surprised that tech is mentioned only as the 4th spot on our inclusive list of tips that will help you improve your SCM.  Supply Chain performance will be improved incrementally with the addition of state-of-the art technology.

From the utilization of machine visibility to the incorporation of artificial intelligence, inventory management can be improved tremendously with the use of technology. Of course, this is just one of the many aspects where tech can be effectively used to optimize your supply chain. In fact, technology is too broad a topic, that we can't justify asking people to utilize technology as a single "tip" to improve supply chain performance in India (spoiler alert).

Automate Procurement

Though this would have fit better as number 2 on our list, we felt that tech deserved it's own section in our list.

If you've managed inventory before, you know exactly how much time it takes for you to continuously monitor and gauge the inventory levels. ERP (Enterprise Resource Planning) systems with an in-built SCM feature can help you automate the purchasing process.

Whenever the RM level falls beyond a certain pre-defined limit the system will automatically place orders with the vendors. This will ensure that an appropriate level of inventory will be maintained at all time.

Data Analysis

Decision-making becomes a million times easier if the right insights and the right data is presented to the key-decision makers at the right time. With the growth of the SaaS industry, along with integrations from your CRM - you can create customized reports to gain valuable insights in-real time. Be it inventory, shipment, or production, there are plenty of tools available to access, process and gain insight from real time data instantly.

Psst. This trend is about to further increase with the inception of blockchain technology.

Transparency and Standardization

Process standardization and transparency are the two biggest solutions that can completely revamp your supply chain. When each individual process is standardized, efficiency is increased tremendously, saving the organization both the cost and the time involved.

Transparency helps in assigning accountability - a major problem faced in building robust supply chains. Supply chains across the world are bound to be riddled with wastes, mistakes and fraudulent practices. We understand that we're mentioning inventory management one too many times here, but one of the biggest pain points of a supply chain manager is to tally the physical inventory count with the numbers that are recorded in the software. Increasing SCM transparency will help identify the pain points, and reduce the wasteful losses.

 

Understanding business processes and supply chains can be an extremely daunting task, especially for businesses that are used to their existing models. A second pair of eyes will go a long way in identifying existing business problems, and provide a fresh perspective. Being one of the leading consultants in the Indian space, Krysalis is sure to identify, diagnose and address the different pain points in your supply chain. Not only do we consult and advise your business on what action could be taken, we guide you through the process of implementing it - making us one of the best consultancy in India.

 

What are you waiting for? Contact us now!