When you grab your favorite brand of pasta in the supermarket or swipe your credit card to get the smartphone of your dreams, the last thing you’re concerned with is how these products made it to you. But you will definitely have a thing or two to say if that pasta is not on the shelf or the smartphone vendor has run out of stock.
These are scenarios companies strive to avoid. Cases like these could prompt consumers to switch brands or express their dissatisfaction through negative reviews. Corporate image suffers, clients defect, and ultimately sales take a hit. This is why supply chain management (SCM) is a focal point for every business organization: supply chain performance is a key contributor to success. Let’s look at how optimizing SCM can deliver maximum sales results and thus drive a business to prosperity.
Guides decisions on inventory
Simply put, this means companies know what to stock. Effective inventory control is critical for success: by ensuring swift movement of the goods, it minimizes the risk of working capital drain associated with bloated inventories.
So how do companies know what to stock? The answer is analysis. It will show which products are more popular with consumers and determine future orders. More importantly, ongoing analysis will provide insights into demand patterns and improve forecasting. With better visibility, companies can effectively control inventory levels.
Nowadays, conducting supply chain analyses has become a routine task thanks to the wealth of analytics suites available. The right demand planning software, for example, can provide insights that streamline the supply chain and ultimately boost customer satisfaction.
Determines priority locations
Today’s sophisticated analytic tools also allow companies to determine which stores need an inventory boost. Customer satisfaction is critical for brand loyalty and when buyers can’t get what they expect, their loyalty may waver.
In addition to keeping customers happy, knowing where to stock is closely linked to a company’s financial performance. When the supply chain is not optimized, businesses pay the price through higher procurement, transportation, and storage costs. These, in turn, interfere with working capital allocation and cash flows.
Pinpoints best time to stock
Timely delivery is essential for keeping customers happy, especially in the age of e-commerce. When supply chain management is done properly, a company will know when inventories need adjustment. As a result, it will achieve short lead times and operate as efficiently as possible.
A simple example can illustrate all of the points above. Christmas is knocking on the door, and this is the busiest time of year for retailers. The ones that have streamlined their supply chain and conducted their analyses will know what goods are in highest demand during the holiday season. They will also know which stores generate the biggest turnover and make sure these are well stocked. Last but not least, they will take extra care to ensure prompt fulfillment and shipping so that presents don’t arrive days later.
As already noted, a well-oiled supply chain machine keeps customers happy. Without customer satisfaction, no business can hope to prosper. However, proper SCM is also critical for keeping down operating costs and improving financial performance. When all these factors align favorably, a company is well and truly on the path to sustained sales growth.