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Improve Your Company's Efficiency with Supply Chain Management
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Improve Your Company's Efficiency with Supply Chain Management

Refocus On What You Do Best

Written by ATC Industrial

Supply chain management (SCM) provided by a third party is a relatively new service. In fact, the terms "supply chain" and "supply chain management" were coined in 1982 by Booz Allen Hamilton logistician Keith Oliver. Although many companies have now been outsourcing their supply chains for several decades, there has never been a greater demand for supply chain management solutions than today. Due to a number of factors, including globalization and developments in various technologies (especially Information Technology), today's businesses simply cannot afford to take the efficiency of their supply chains for granted.

The supply chain is the sequence of events and processes responsible for the production of a commodity, as well as its distribution. The supply chain begins with the sourcing and procurement of raw materials and ends with the final distribution of the commodity to a customer. Every process that takes place in between sourcing and distribution, from product assembly and manufacture to warehousing and forecasting expected demand, is a part of the supply chain. The role of SCM is to improve the efficiency of a client's supply chain, reducing costs and ultimately improving their bottom line. SCM companies provide this service in a number of ways:

Cutting Costs

The sourcing of raw materials and other goods or services needed to produce a business' commodities is one of the first things a qualified SCM team will analyze. Typically, SCM companies will have well-established relationships with distributors and often more buying power. They leverage these advantages to provide their clients with the materials or services needed at lower costs than the company would be able to negotiate on their own. In addition to acquiring less expensive materials, a third-party SCM organization will develop strategies to minimize every expense involved in the supply chain, including labor, shipping and transportation, assembly, kitting, and even customer service.

Improving Logistics

The successful SCM organization will undoubtedly involve managing the multidirectional flow of goods from sourcing to distribution. To do this well, both physical and abstract resources must be considered. In addition to reductions in transportation and warehousing costs, the flow of abstract resources such as time and information must be analyzed and integrated in the most cost effective manner possible. Today's SCM relies heavily on the implementation of sophisticated computer programs and information technologies that streamline every aspect of your business' logistics.

Expanding Your Reach

The rapid globalization that has been occurring since the late 20th century has without a doubt affected the way goods are sourced. Third-party SCM firms will likely procure from all over the globe, finding the best prices available. Outsourcing supply chain management can also help you expand distribution into markets that you may not otherwise have the opportunity to enter. For example, it may be easier to test the waters of a foreign market by utilizing warehouses managed by your SCM team as opposed to building your own warehouse and infrastructure.

Refocusing on What You Do Best

Many companies, especially smaller start-ups, lack the manpower and expertise to optimize their own supply chain. Hiring an in-house employee to manage your supply chain is an option, but it can be a challenging endeavor. It would likely take quite some time to find someone qualified, and additional training would likely be needed to acquaint that person to the ins and outs of your particular business. Although it has become cliché to say, time truly is money. By hiring a third-party to manage your supply chain, you will provide your company with more time to focus on what it does best, and focus on the more holistic aspects of your business, such as innovation and new product development.

These are just a few of the basic advantages that hiring a third-party to manage your supply chain can provide for you. Finding the right SCM team for your company will lead to many more direct and indirect benefits. Whether your company has a specific problem that needs to be addressed, or has seemingly plateaued, implementing an external SCM plan may be the next step to take your business to the next level.

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