It is generally understood that supply chain management is a key component of most organizations and is critical to corporate performance and consumer happiness.
Boost Customer Service
- Customers anticipate receiving the proper product assortment and amount.
- Customers want items to be available in the right place at the right time. (For example, if an auto repair shop does not have the required components in stock and cannot service your automobile for an extra day or two, customer happiness suffers.)
- Correct Delivery Time - Customers want their purchases to be delivered on time (i.e., customer satisfaction diminishes if pizza delivery is two hours late or Christmas presents are delivered on December 26).
- Customers want items to be maintained as soon as they are purchased. (For example, when a house furnace breaks down in the winter and repairs cannot be done for many days, customer satisfaction suffers.)
Reduce Operating Costs
- Reduces Purchasing Costs - Retailers rely on supply networks to deliver pricey items promptly in order to avoid keeping costly inventory in stores for longer than required. To minimize excessive inventory expenses, electronics retailers, for example, demand quick delivery of 60" flat-panel plasma HDTVs.
- Reduces Production Costs - Manufacturers rely on supply chains to reliably deliver materials to assembly facilities in order to prevent material shortages that would cause production to shut down. An unforeseen components shipping delay, for example, that prompts a car assembly plant closure may cost $20,000 per minute and millions of dollars in missed pay each day.
- Decreases Total Supply Chain Cost – Manufacturers and retailers rely on supply chain managers to create networks that satisfy customer service objectives at the lowest overall cost. Supply chains that are efficient allow a company to be more competitive in the market. Dell, for example, used an innovative computer supply chain method that involves manufacturing each computer based on a single client order and then sending the device directly to the consumer. As a result, Dell avoided having massive computer inventory languishing in warehouses and retail locations, saving millions of dollars. In addition, because computer technology evolved so quickly, Dell avoided holding computer stocks that may become technologically outdated.
Improve Financial Position
- Increases Profit Leverage - Supply chain managers are valued by businesses because they assist regulate and minimize supply chain expenses. This can lead to significant increases in business profitability. For example, U.S. consumers use 2.7 billion packets of cereal each year, thus lowering U.S. cereal supply chain costs by only one cent per cereal box would result in a $13 million savings industry-wide as 13 billion boxes of cereal flowed through the enhanced supply chain over a five-year period.
- Reduces the use of big fixed assets such as plants, warehouses, and transportation vehicles in the supply chain - Firms appreciate supply chain managers because they reduce the use of large fixed assets such as plants, warehouses, and transportation vehicles in the supply chain. If supply chain specialists can rebuild the network so that it can service consumers in the United States from six warehouses rather than ten, the company will avoid the construction of four extremely expensive facilities.
- Increases Cash Flow - Companies respect supply chain managers because they help to expedite product delivery to customers. For example, if a company can manufacture and deliver a product to a client in 10 days rather than 70 days, the company may pay the customer 60 days sooner.
Protect Cultural Freedom and Development
Defending Human Freedom - A country's citizens rely on military logistics to defend their way of life from those who attempt to destroy it. Military logisticians strategically place planes, ships, tanks, missiles, and other weaponry to ensure the safety of soldiers and civilian residents. Furthermore, greater logistical effectiveness results in military victory. The B-2 Stealth Bomber, for example, can deliver bombs to a target without being detected by enemy radar.
Ensures the Provision of Necessities - Citizens rely on supply chain managers to develop and run food, medicine, and water supply chains that keep items from being tampered with. Advanced packaging techniques, cutting-edge surveillance cameras, global positioning systems, and RFID inventory monitoring are just a few of the measures utilized to keep terrorists out of these critical logistical networks.
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