6 Goals Of Supply Chain Management (SCM)

goals of supply chain management

According to the definitions of supply chain management, it is a complicated endeavour that transcends the scope and capabilities of a single firm. A substantial amount of effort is required to establish and maintain a supply chain network. This entails a lengthy action list requiring expertise, time, and resources. Establishing strategies, forming partnerships, deploying technology, and investing in capacity are critical things to fulfil various goals of supply chain management.

Before an organisation can manage its supply chain effectively, it must first understand its precise purpose and objectives. Understand the various supply chain management goals that a business must take into consideration.

1. Fulfilment Efficiency

At its most fundamental level, supply chain management’s objective is to ensure that inventory is readily available in customer-facing positions to meet demand. Organisations must strive to match supply and demand on time by making the best use of cross-chain resources. Partners in the supply chain must collaborate to maximise resource productivity, standardise processes, avoid duplication of effort, and reduce inventory levels. These procedures will assist the firm in reducing waste, reducing expenses, and increasing supply chain efficiency.

Cost reduction in the supply chain is an important goal, especially during periods of economic uncertainty when businesses seek to conserve money. Efficiency efforts can be directed at any component of supply chain operations. However, transportation and inventory management are frequently targeted for cost reduction.

2. Customer Value Creation

Customers are the organisation’s lifeblood and necessitate the existence of a supply chain. As a result, a core goal of supply chain management must be to constantly meet or exceed customer needs. Customer value creation begins with a market-driven client service strategy founded on well-understood customer expectations. These criteria should be the base to develop supply chain strategy, design, and capabilities. As a result, service will be of higher quality, variability will be reduced, and fewer violations will be addressed.

There are some excellent techniques available to assist in determining what customers value the most. One of the most popular is referred to as quality functional design (QFD). To begin developing a QFD, conduct consumer interviews to ascertain which characteristics or qualities are most important to them. Then you match those qualities to your design to guarantee that you’re concentrating your efforts on creating products and services that truly fulfil your clients’ needs.

A-B Testing is another often used strategy for discovering client preferences. To conduct an A-B Test, you must provide your customer with two options: Option A and Option B. Online merchants frequently prefer this strategy to determine the best fulfilment solution based on various parameters.

3. Increase Responsiveness and Flexibility

Another critical reason to invest in supply chain management capabilities is the ability to adapt to change. The current business environment is volatile, with numerous factors influencing how organisations run and survive. Supply chain management can assist businesses in adapting to the challenges of globalisation, economic instability, and rising consumer expectations, among other concerns.

Economic crises wreak havoc on consumer demand and manufacturing. Weaker firms who cannot foresee changes in their supply chains, adapt capacity and manage inventory levels will perish. To minimise the impact of economic downturns, firms should develop adaptive operating models anchored by a flexible supply chain and a variable cost structure. Additionally, the adoption of standardised procedures and systems enables the company to rapidly scale up or down operations in response to sudden variations in demand.

Additionally, shortened product life cycles, the advent of new technologies that enable supply chain innovation, and increased government regulation of supply chain operations such as transportation all serve as compelling reasons to maintain agility. A responsive and adaptable supply chain will be able to react to these changes with minimal disturbance.

4. Make Supply Chain Network Resilient

Apart from the ongoing business issues, firms frequently face abrupt and severe supply chain interruptions. Natural disasters, labour strikes, and supplier failures are all examples of uncommon events. These factors impede the flow of goods and expose the company to financial and reputational harm.

Given the high cost of supply chain disruptions, it is important for businesses to manage these supply chain risks. Along with risk mitigation measures, it is critical to building disruption management capabilities. Organisations must have the capability to identify and overcome disruptions and redesign procedures to mitigate future risks. For recognised risks, it is critical to creating robust supply chains that are adaptable enough to recover from significant accidents quickly. Supply chain managers must plan and test different scenarios for hazards that are unlikely to occur but might be catastrophic.

5. Recognise True Competitors

The next objective of the supply chain managers is to find the right competitors. In this digital era, true competition may not be the ones that organisations assume they are. For example, many traditional brick-and-mortar retailers have been reluctant to recognise that their most aggressive competition is not another brick-and-mortar retailer but an online marketplace – Amazon.

To determine who their actual competitors are, organisations must shift their focus away from the product or service they provide and towards the problem they solve. Dr Clayton Christensen of Harvard Business School coined the term ‘Jobs to Be Done’ Theory to describe this method. Consider the “task” that the product or service performs for clients and whether other products or services could do the same function better, faster, or cheaper. These alternative sources are the organisation’s true competitors, and they must build and manage their supply chains in such a way that their product performs the same function as their competitors’.

6. Increase Financial Success

One of the most obvious goals of supply chain management is to contribute to the organisation’s financial performance. Historically, cost-cutting strategies have focused on streamlining stock levels to reduce inventory carrying costs, automate fulfilment operations to reduce labour costs, and consolidate orders to reduce freight costs. By contrast, leading firms today leverage the supply chain to increase differentiation, sales, and market penetration. Their objective is to maximise shareholder profit and competitive advantage.

A dual focus on cost control and revenue development enables C-level executives to understand the supply chain management’s organisational value. As organisations place a greater strategic focus on financial goals, their ability must evolve from a collection of day-to-day operations to a strategic process led by supply chain managers. 

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