Supply chain management (SCM) is important to companies and organizations since it ensures efficient flow of goods and services and ensures proper movement, storage and supply of raw materials, inventory and finished goods from one the pointy of origin to the point of consumption. This implies that SCM is affected by both external and internal factors ( Christopher , 2016). The following are reasons why managers should pay attention to the company’s internal system as well as the broad external environment in their effort to manage SCM.
Managing SCM means entails the whole process involving sourcing of raw materials and supply of finished products. This means that the company cannot be functional without the involvement of other companies that supply raw materials. For instance, a widgets company requires widget components from other companies to be used as raw materials in the process of manufacturing According to Christensen & Overdorf (2000), SCM can only be effective if utmost attention is paid to the supplier of raw materials.
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Additionally, managing external business environment is as important as managing the internal business system since the main goal of manufacturing companies is to gain profits. Profits increase with increase in the number of customers. There is need to manage external business environment that involves customers in order to gain as much profit as possible (Luqmani, Leach & Jesson, 2017). An example of a failing company due to poor management of customers is a scenario whereby customers avoid purchasing goods due to the loss of utility. It is the responsibility of company management to determine the utility of their products among customers before producing and supplying them.
With increased rate of information flow in the manufacturing sector, there is need to pay attention to both internal and external business environments. This is because all aspects of the company’s manufacturing are entirely dependent on the level of information and technology as well as its relationship with other companies (Baltzan & Phillips, 2008). An ideal example is whereby company employees use technology to connect with other employees from other companies. If there is lack of conformity in the ideal working standards in one company, employees may end up seeking better working environment in different companies. Further research demonstrates that most organizations face challenges in achieving competitive advantage because they lack clear information on the existing external environment (Goetsch & Davis, 2014).
In summary, both external and internal business environments are essential in achieving the desired organizational outcomes in regard to the supply chain management. Most companies focus more on internal than external environment which reduces the company’s ability to perform optimally.
References
Baltzan, P., & Phillips, A. (2008). Business driven information systems . McGraw-Hill/Irwin.
Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard business review , 78 (2), 66-77.
Christopher, M. (2016). Logistics & supply chain management . Pearson UK.
Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence . Upper Saddle River, NJ: pearson.
Luqmani, A., Leach, M., & Jesson, D. (2017). Factors behind sustainable business innovation: The case of a global carpet manufacturing company. Environmental Innovation and Societal Transitions , 24 , 94-105.
