Why is supply chain management important? Supply chain management is important for innovating, adding value, and creating stability in the creation and delivery of goods and services for any organization. It’s also important in the larger context of society to ensure the availability of critical commodities and services that the public relies on.
In the wake of the global pandemic, it hardly seems like you need to explain the importance of supply chain management. With hospitals short on ventilators, the crisis behind supply chain breakdowns was on full display right from the start.
We all had a front row seat to what happens when vital supply chain links in the economy were stretched or broken during the pandemic.
Then the slipping supply chain started to hit closer to home for most Americans. Toilet paper became a hard-to-find commodity. Efficiencies built into paper product supply chains over decades of production have reduced costs enormously. But developing those efficiencies had made the process so brittle than when more small rolls of residential toilet paper were needed, suppliers couldn’t switch over from the processes used to make larger commercial rolls.
But that was really just the start.
A Failing Supply Chain Creates a Failing Economy
Some businesses went under or had to radically restructure when the basic components of their products became stranded in marooned cargo ships haunting the anchorages around major North American ports. The New York Times reported that ports were unable to store waiting containers, and therefore couldn’t offload more. And without empties to send back to manufacturing centers overseas, other goods that were desperately needed couldn’t be shipped in the first place.
The economy felt the heat quickly. The Bureau of Labor Statistics registered the sharpest spike in unemployment in American history: some 16.3 million workers lost their jobs in March 2020.
These were people’s lives and livelihoods. No one who lived through it has to ask the question why is supply chain management important.
But just experiencing the downsides of a shattered supply chain doesn’t fully explain its importance in the modern world. And just because the pandemic disruptions are getting worked out of the system doesn’t mean fresh needs and threats aren’t emerging.
What Is Supply Chain Management and Why Is It Important?
The supply chain is vast. It comprises the entire sequence of:
- Procuring raw materials, either directly or from outside sources
- Transporting those materials to locations where they are transformed into products
- Storing and further moving products through distribution channels
- Ensuring end-users receive those products in a timely and useful way
- Providing avenues for the return or repair of defective products
What a full view up and down that long chain of connections allows is genuine improvements in efficiency. That efficiency can be used to:
- Reduce costs to consumers
- Reduce impacts of production and transportation on the environment
- Increase profitability and sustainability within a business
- Enable new goods and services that might never have been possible before
So, supply chain management becomes important to enable all those possibilities… on top of getting toilet paper into your bathroom on time.
Why Supply Chain Management Is Important to Society
Many of the goods that people rely on for basic health and sustenance now exist at the end of a long supply chain. Crops are harvested with combines built in Mexico, fertilized with phosphorous dug in China, processed in Canada. Electrical grids rely on components made with rare earth elements only available from overseas.
Even domestic supply chains, such as those that deliver critical drugs and medical supplies, are vulnerable to disruption.
With those links broken, life would quickly become very different. But it’s not just because of food or utility shortages.
Supply chains have also come to shape global geopolitical relationships. Economic globalization has created interdependence between countries that otherwise wouldn’t exist. Economists have found that globalized supply chains have resulted in a net benefit to countries worldwide.
Perhaps more importantly, however, incentives to protect international trade routes have been associated with a reduction in the risk of conflicts in those areas. The world has become a less violent place alongside the growth of global supply chains.
Why Supply Chain Management Is Important to Businesses and Other Organizations
For businesses and other types of organizations, like non-profit groups and government agencies, the supply chain is important for other reasons.
While all those groups clearly also benefit from the flow of goods and services within society, they also get unique benefits from solid supply chain management.
As a path to the efficient use of resources, managing the supply chain is how those organizations survive and thrive. For non-profits and government, solid SCM practices let them stretch limited resources to serve more people. For corporations, good SCM is what allows them to build a competitive advantage even in crowded markets.
For the same customer base and the same commodity costs as their competitors, a business that builds the better supply chain will come out ahead in several ways:
- With transportation or storage costs trimmed to the bare minimum, their profitability may increase
- By developing smoother distribution, they may be able to offer products at a lower rate.
- A better supplier relationship or shipping vendor can result in fewer defects and happier customers, leading to greater market share.
So strong supply chain management is one of the key components in business competition today.
Getting the Right Education to Help Organizations Enjoy the Benefits of Supply Chain Management
Both the links of the supply chain and the process of managing them are enormously complex in the modern world. Supply chain managers may find themselves working in any one of the important specialties in the field, whether it’s trans-oceanic bulk shipping or cold storage warehouse management.
And, of course, there must be well-informed and expert managers who can keep the entire scope in mind. They develop the strategies and give the marching orders that make supply chains succeed or fail as circumstances shift.
Any of those roles require a college education. Supply chain management degrees are loaded with both specialized training in logistics and more general liberal arts education courses. They bring both the business knowledge and the critical thinking skills you need to thrive in the fast-paced world of supply chain management.