Supply chain management is the organization, planning, control, and regulation of the flow of goods. It starts with the receipt of orders and purchasing raw materials to ensure the production of goods, including the optimal cost of resources for the final consumer. This strategy aims to obtain a measurable aggregate economic effect, particularly reducing costs and meeting the demand for definitive results. Globalization has opened up several new opportunities for supply chain management, from enhanced search capabilities to supplementary markets. Although new chances are correlated with the global market, globalization also presents challenges for the supply chain management. Therefore, it is valuable to identify the negative and positive aspects when applying supply chain management.
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Positive Properties of Supply Chain Management
The supply chain managers need to guarantee continuous operation so that businesses can focus on service quality. Thus, if supply chain management (SCM) is established, companies will work more efficiently. That is, a positive effect can be achieved if all processes in the supply chain are strategically planned and performed. At the same time, it will assist businesses in predicting demand more accurately and match it. Accordingly, the company will quickly adapt to constant market changes and variations in trends, which will increase productivity. Additionally, a meaningful positive impact is that the SCM helps firms gain a powerful reputation in the market. This improves the company’s ability to satisfy customer requirements (Kache 21). The actual effect is not just attracting new consumers but also influencing their brand loyalty. Businesses that prioritize quality client service and ensure a smooth flow of goods and services will be capable of developing a large base of regular buyers.
At the same time, SCM involves strengthening good contacts with suppliers and distributors. Encouraging collaboration through effective communication supports increased productivity and reduces costs. One of the main advantages of the SCM is that firms have software and production metrics that enable them to make decisions about choosing suppliers. Cost structure, quality control measures, and timeliness determine how certain cooperation will affect the supply chain. It also contributes to the long-term sustainability of the business (Koberg 1082). It is worth noting that potential is also one of the specific features. Supply chain management includes inventory control, which with effective planning and execution can assist reduce expenses.
However, the application of the supply chain directly influences the quality of products and services of the company, which are produced in accordance with international standards (Kuldeep 878). This is significant because the price of repairing or replacing a product due to quality problems can be detrimental to businesses with a limited budget. Thus, the use of the SCM grants the company a competitive advantage in the market and decreases delays and costs.
Challenges of the Supply Chain Management Process
Supply chain management is a unique process because it involves several companies and depends on many aspects. In practice, such multitasking has not only positive aspects but also negative ones. First of all, the problem may arise due to conflict between the parties involved. It occurs when the optimal course of actions for an individual firm in the supply chain may differ from the ideal plan of actions for the entire chain. Conflict also frequently arises from competition in the distribution of profits. Sometimes even internal, interpersonal disputes between departments or individuals can hinder productivity. One of the main difficulties of the SCM is that it requires quite a lot of investment. These expenses include not only money but also time and human resources. Lack of skills, knowledge and low staff qualifications lead to high labor costs and low productivity (Yadav et al. 167). However, hiring a qualified team is quite expensive and therefore becomes unattainable for small businesses.
In addition, the supply chain management process itself is complex. The presence of several departments can lead to statistics inaccuracies, which inherently reduce the value of information and the appropriateness of decisions made with it. Mistakes can arise in forecasting and manual data entry, leading to errors in price and order numbers. Such data discrepancies can interfere with the normal functioning of the departments and the business as a whole. Duplication of effort resulting from barriers between departments is also a challenge. The SCM process will only be effective if there is coordination between all the sub-departments of the company; if there is not, the system will collapse. For example, the production unit will not produce the goods in time if the marketing division does not inform about a possible order (Toubolic and Mattews 39). There may also be difficulties with a high level of stocks. It is associated with uncertainty, large batch sizes, fluctuating demand, seasonality, and high service levels. It can also harm an organization’s operations because it includes storage costs, reduces liquidity, and risks damage and obsolescence.
The complexity of the supply chain network increases with further technological advances, which causes new difficulties and problems for business. However, companies will adapt to ever-increasing challenges with effective management, consisting of strategies and best practices for integrating and coordinating all functions, activities, operations, and people throughout the chain. It is necessary to understand that the benefits of this process for the company are undeniable. All that needs to be done is to minimize risks and coordinate activities between departments.
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Kache, Florian. ‘Challenges and Opportunities of Digital Information at the Intersection of Big Data Analytics and Supply Chain Management’. International Journal of Operations & Production Management, vol. 37, no.1, 2017, pp. 10-36.
Koberg, Esteban. ‘A Systematic Review of Sustainable Supply Chain Management in Global Supply Chains’. Journal of Cleaner Production, vol. 207, no. 10, 2019, pp. 1084-1098.
Kuldeep, Lamba. ‘Big Data in Operations and Supply Chain Management: Current Trends and Future Perspectives’. The Management of Operations, vol. 28, no. 11, 2017, pp. 877-890.
Touboulic, Anne, and Lee Matthews. ‘Re‐imagining Supply Chain Challenges through Critical Engaged Research’. Journal of Supply Chain Management, vol. 56, no. 2, 2020, pp. 36-51.
Yadav, Gunjan, et al. ‘A Framework to Overcome Sustainable Supply Chain Challenges Through Solution Measures of Industry 4.0 and Circular Economy: An Automotive Case’. Journal of Cleaner Production, vol. 254, no. 10, 2020, pp. 128-234.