The supply chain between supplier of raw materials, manufacturers and retailers has become much more efficient over the last few years. Empty shelves in retail outlets triggers replenishment orders with manufacturers. It is important that there is an efficient well-tuned system to ensure that the right amount of stock arrives on the shelves, at the right price, within the correct time frame. As collaboration and technology has increased partners in the supply chain have been able to more accurately determine what is needed and so improve results.
Examples include:
- Potential problems can be dealt with before they occur. Manufacturers can accurately tell buyers if they are able to meet their orders upfront. Buyers don’t want to disappoint their customers. There is no breakdown in relationships which commonly occurs when buyers don’t receive the amount of stock they originally ordered. Manufacturers who anticipate the shortage before the buyer is disappointed, may be able to offer a substitute product or other incentive to keep the buyer happy.
- Retailers can accurately forecast the sale of items and order the right amount of stock. They are able to sell at the right price without any discounts to reduce stock. As a result, profit margins are improved.
- Today’s tools dynamically allocate resources and schedule work based on the sales forecast, actual orders, and promised delivery of raw materials. Manufacturers are able to confirm a product delivery date when the order is placed, significantly reducing incorrectly filled orders.
- Efficiently run supply chains allow firms to quickly deliver products to the end-user for a low cost. With accurate forecasting at the retailer level the manufacturer has a clear understanding of what is needed to supply the order. There is less wastage on the purchasing of raw materials, on transport between supplier, manufacturer and ultimately retailer and finally on warehousing where excess stock would be held. As a result, the pricing of goods is more accurate for the consumer.
References:
CIO Africa – What is supply chain management (SCM)? Mastering logistics end to end by Bart Perkins & Thomas Wailgun. https://www.cio.com/article/2439493/what-is-supply-chain-management-scm-mastering-logistics-end-to-end.html
The Importance of Supply Chain Management – https://cscmp.org/CSCMP/Develop/Starting_Your_Career/Importance_of_Supply_Chain_Management.aspx