5 Main Objectives of Supply Chain Management

The core objective of supply chain management is to provide products/services to the customers. Because an efficient supply chain means a satisfied end customer. A supply chain is the area of all activities, from searching for raw materials to processing them, manufacturing them, transporting them, and delivering them to the final consumer.

In other words, the supply chain is a strategic and logistical function that involves all the operations essential for a product to reach its final customer in optimal condition.

In this blog, we will focus on some of the main objectives of supply chain management that truly serve the end customer and boost your chances of success. Let’s start!

5 Main Objectives of the Supply Chain Management

The next step is to derive objectives for the individual project from the guidelines that are the focus of supply chain management. It is helpful to define a few or even a single main objective. This reduces the complexity of the project and creates commitment among all project participants.

So, five core objectives of SCM may be crucial for any business:

Objective 1: Increase Customer Service

The faster you deliver products to the customer, the more likely you’ll impress them. So, improved logistics through increased product availability, on-time delivery, and shorter delivery times go a long way.. A perfect logistics service has a positive impact on customer loyalty and sales.

So many people get confused thinking that logistics and supply chain are the same concept. But they are not!

Logistics is the transportation of raw materials to the company and the final production to the customer. But a supply chain extends beyond these boundaries. An effective supply chain includes activities like transporting, warehousing, inventory management, production management, distribution management, and marketing management. So, we can say that logistics is a part of supply chain management.

Read our detailed blog on the difference between logistics and supply chain management. 

Okay, let’s come back to the second objective of supply chain management.

Objective 2: Save Costs

Improved information and communication technologies lay the foundation for simplifying business processes. For example, through the automation of ordering, information capture, invoicing, and debt collection between companies, you are on the way to reducing significant costs in the supply chain. As a result, optimized supply chains result in fewer errors, thus lowering quality costs.

Objective 3: Reduce Tied-up Capital

Shorter processing times, accurate invoicing, and automated debt collection shorten the cash-to-cash cycle time, thereby reducing the need for liquid funds.

Additionally, inventory levels can be reduced through: linking planning systems, overall process optimization, and optimized warehousing. Hence, we can call reducing capital the main objective of the supply chain because it encourages lean SCM practices for businesses.

Objective 4: Limit Operational Risks

Operational risks are reduced by reducing inventory levels and customer payment deadlines. Logistics services such as transportation or warehousing can be outsourced to specialized service providers. These can perform the corresponding tasks professionally, reliably, better, and more cost-effectively.

Objective 5: Environmental Sustainability in SCM

This is one of the objectives of supply chain management which is getting more traction in modern times. Nowadays, companies focus on reducing the environmental impact of supply chain activities through eco-friendly practices, such as using sustainable materials, optimizing transportation routes to lower emissions, and minimizing waste. This is because a sustainable SCM not only helps protect the environment but also appeals to nature-conscious consumers and stakeholders. You make two friends with one gift. Win-win situation.

But you may have one prerequisite to meet those objectives of supply chain management in competitive times, which is mentioned in the next section:

Supply Chain Management in ERP Software

A qualified ERP system is essential for the required speed and dynamism within the supply chain. Manually performed standard processes are a thing of the past. We recommend a critical review of the ERP system to ensure its suitability for everyday use. A good ERP system supports your employees in the following areas:

• Automated production planning processes,
• Intelligent audit processes in order management,
• Incident reports to affected employees when action is required,
• Automated dunning processes,
• Automated import of parts lists,
• Digitalize logistics management,
• Support tools for quotation calculations.

Supply Chain Management Software for Construction

Since the construction industry is complex and requires a smooth function of all supply chain processes, you will need specifically designed SCM software for construction. Construction contractors are striving to increase their investment in software and technology for their supply chain. At the same time, the focus is shifting from purely reducing costs and optimizing resources in the process chain to meeting customer needs. Given the constantly changing industry environment, choosing the right software is crucial.

Get all your answers related to supply chain management software for the construction industry here.

Conclusion

So what we can sum up about the objectives of supply chain management is that an effective SCM can give companies decisive competitive advantages. It pursues the following goals:

• Shorter delivery times and higher delivery reliability.
• Lower inventory levels and capital commitment.
• Shortening lead times as well as cash-to-cash cycles.
• Reduction of warehousing costs through just-in-time supply.
• Greater adaptability to fluctuations in demand, disruptions, or new market requirements.
• Better utilization of resources and capacities, including personnel, machinery, and transportation.

Ultimately, all these objectives of supply chain management leads to lower costs and higher profitability, as well as more satisfied customers.

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