Supply chain management is a key segment of most businesses. It is the management of goods and services circulation as well as all processes that transform raw materials into finished products. It also involves the active streamlining of the supply-side activities of the business to optimize customer value and further gain a competitive advantage in the marketplace ( Christopher, 2015 ). Supply chain management plays a significant role in the financial position of an organization in many ways.
One of the ways in which supply chain management improves the financial position of an organization is increasing profit leverage. In most cases, companies prefer employing supply chain managers because they assist them in controlling and decreasing supply chain costs. The proper management of the supply chain costs can result in a dramatic increase in the profits of the firm. For instance, in the United States, consumers use 2.7 billion packages of cereal yearly, so reducing the United States cereal supply chain costs by just one percent can result in 13 million dollars saved across the industry ( Tracey, Lim &Vonderembse, 2016 ). Apart from the aforementioned ways, supply chain management also plays a critical role in society.
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Another way in which supply chain management improves the financial position of an organization is decreasing fixed assets. Notably, companies value supply chain managers because they minimize the usage of large fixed assets such as warehouses, vehicles, and plants in the supply chain. For instance, if the supply chain experts in the United States can redesign the network to properly serve United States consumers from ten warehouses to six warehouses, then the companies can avoid building the extra four expensive buildings. Increasing the cash flow of an organization is another way in which the supply chain improves the financial position of an organization. This is achieved when companies employ supply chain managers to speed up product flows to customers. The supply chain management capabilities and knowledge can be utilized to carry disaster relief operations, support medical missions and other types of emergencies.
References
Christopher, M. (2015). Logistics and supply chain management: creating value-adding networks . Pearson education.
Tracey, M., Lim, J. S., & Vonderembse, M. A. (2016). The impact of supply-chain management capabilities on business performance. Supply Chain Management: An International Journal , 10 (3), 179-191.
