What is the Importance of the Supply Chain in Business Operations?

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The Fast Moving Consumer Goods (FMCG) industry in India is the 4th largest sector in India. The rural segment of the economy contributes to 45% of the revenue that the FMCG industry derives, while the rest is derived from the urban segment. 

Even though the urban segment holds a higher share of the revenue generated by the FMCG sector, it is the rural segment where growth has been exceptional in the past few years. 

The retail market in India is estimated to grow to a market share of $1.1 trillion by the end of 2020, growing from $840 billion in 2017. 

This scale of growth is founded on robust company fundamentals, especially supply chain management, which has triggered consumption in rural areas. 

Supply chain meaning the process of converting raw materials into finished goods, delivering those to consumers, and after-sales service. Effective supply chain management sits at the core of any business fundamental and profitability. 

Why is supply chain management important?

Supply chain determines how effectively a company or firm, especially belonging to the FMCG and FMCD sectors, can conduct the production and delivering of goods to its consumers to create value for them and itself. 

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It is also a primary determinant of a company or firm’s competitiveness in the market. Resultantly, adequate supply chain finance is crucial to a business.

The benefits of supply chain management percolate consumer satisfaction and contribute to a company’s financial health as well. 

The importance of supply chain management is discussed below:

  1. Consumer satisfaction 

Ways in which efficient supply chain nudges consumer satisfaction upwards are – 

  • Right quantity

Customers expect goods to be delivered to them in the correct variety and the right quantity. If goods delivered do not match consumer expectations, it undermines the value they derive from those goods – a primary reason why every businessman should know about supply chain management.

  • Right place

Consumers must find the products they are seeking in the right place, failing, which will diminish customer satisfaction. For instance, if a consumer is looking for a laptop and does not find the model, he/she is looking for, it undermines his/her satisfaction. 

  • Right time

It is not only important to have goods in the correct quantity at the right place, but should also be available to consumers at the precise time of need. For instance, if an individual wants to purchase cereals of a particular brand, but its arrival to his/her location is due for 1 or 2 more days, it will diminish consumer satisfaction. 

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  • Satisfactory after-sales service

Supply chain meaning defines that the process begins with production and ends at satisfactory customer service. Hence, it is essential that consumers receive proper after-sales service to increase the value of a good or service. 

  • The improved financial position of a company

Efficient supply chain management does not only create value for a consumer but also produces significant financial results for a company. 

  • Low production cost

Production cost refers to the expense borne on account of converting raw materials into finished goods. An efficient supply chain design ensures that raw materials are delivered to plants without delay. A delay would result in a shortage of materials for production which would keep the plants non-functional, thus increasing cost of production. 

  • Effective inventory management

It is crucial to retailers that expensive goods are delivered at the right time to consumers. Prompt delivery of goods would reduce the inventory costs as retailers would not need to hold costly products in warehouses longer than required. Efficient inventory management is an effective technique to save finances. 

  • Lowers supply chain costs

The primary benefit of supply chain management is reduced supply chain costs. As per an Eye for Transport 2018 supply chain management, 24.7% of supply chain professionals believe that delivery cost is a major challenge for B2C companies. 

Hence, a methodical and well-structured supply chain would reduce these costs to increase a company’s profitability from the entire process. 

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Dell managed to save millions of dollars when it adopted the method of developing computers based on customer order and directly delivering it to customers without involving any intermediary. 

At the same time, adequate supply chain finance is also crucial to ensure that a business achieves the desired results at an optimum pace. Businesses can avail a business loan to reduce their financial strain while maintaining supply chain functioning properly. 

Financial institutions such as Bajaj Finserv provide pre-approved offers to minimise time and effort involved in loan processing. These offers apply to multiple credit facilities such as business loan, personal loan, home loan, etc.

Supply chain meaning, hence, shall be well integrated into a business and actively managed and followed to achieve greater levels of customer satisfaction and the company’s profitability. 

 

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