Benefits Of SCM Software That Will Boost Your Profits

⚡ Quick Answer

A data-driven SCM gives visibility across every point of the chain — procurement to manufacturing to delivery. Eight benefits follow: better collaboration through shared information, tighter quality control over suppliers, a higher efficiency rate from real-time material data, the ability to keep up with demand and avoid the bullwhip effect, shipping optimization against rising freight costs, lower overhead, improved risk mitigation, and stronger cash flow.

Source

The eight benefits below, their order and the supporting figures follow 8 Key Benefits of Effective Supply Chain Management (6 River Systems, July 2019; the article is now hosted by Ocado Intelligent Automation, which acquired the company).

1

Better collaboration

Companies face a major challenge in information flow. Oracle reports that 76% of companies do not have an automated flow for information throughout their supply chain. Half of these companies also claim that fragmented information leads to lost sales opportunities. Integrated software solutions eliminate bottlenecks, allow seamless information sharing, and provide a complete view of the entire supply chain from beginning to end. Streamlined data access allows supply chain leaders to have more contexts to make informed decisions.

Sourcing note

The 76% figure comes from the 2019 source article. I could not confirm it against Oracle’s own published supply-chain research: the relevant study, “The Fragmented Supply Chain” (2010), reports that one in three companies see goods move faster than information, and puts the cost of poor information flow at £1.2bn a year in lost UK sales. Treat the percentage as unverified.

2

Improved quality control

Quality control issues follow the rule of 10, explains Arshad Hafeez, Global Expert for Supply Chain Management and Quality Control, SCM-Group Function (GF), in an article for CIO Review. The Rule of 10 states that the cost of replacing or repairing an item goes up tenfold with each step in the process. This can lead to significant costs for companies when quality problems arise.

Quality control is more effective for companies that have greater control over their suppliers and direct suppliers. For example, standard minimum quality criteria can be used to allow direct suppliers to find and partner with secondary suppliers who meet these requirements. Process guidelines that help suppliers comply with your quality standards can also be beneficial. Some companies provide more than just criteria. They conduct periodic audits and request documentation to verify suppliers’ compliance. Hafeez suggests implementing a Management Operating System (MOS), which will allow you to monitor key performance indicators such as:

3

Higher efficiency rate

Companies can implement backup plans by having real-time information about the availability of raw materials and delays in manufacturing. This allows them to avoid further delays. Companies often lack the time and resources to create a Plan B without real-time data. This can lead to issues like out-of-stock inventory or delayed shipments to end users.

Smart automation solutions can also increase efficiency. For example, Healing Hands Scrubs implemented 6 River Systems’ collaborative mobile robotics. This doubled productivity and reduced unnecessary walking by 75%. Your company’s reputation will be enhanced by investing in the best automation solutions and leveraging data to minimizing delays.

The Reality

Healing Hands Scrubs is 6 River Systems’ own customer, and this case study comes from that vendor’s marketing article. It is a vendor-supplied result rather than independent evidence, and worth weighing as such.

4

Keeping up to date with the demand

According to VISA, “If consumer sales rise by 5 percent in one week, a retailer might order 7 percent more product as a response to the increase in demand and the feeling that it will continue,” a report states. The next link in the chain will then order a greater increase from his supplier if he observes a 7 percent increase in demand. The factory might eventually see an exaggerated 20 percent rise in orders.

This phenomenon is known as the “Bullwhip Factor.” It often occurs when supply and demand changes are not communicated in a timely manner. Supply chain executives with real-time, accurate, and integrated information can better predict market conditions and respond quickly to changes in the market to avoid problems like the bullwhip.

5

Shipping optimization

Logistics Management’s The State of Logistics Report shows that freight transportation costs rose by 7% between 2016 and 2017, while private and dedicated trucking prices increased by 9.5%. The cost of a less-than-truckload increased by 6.6%, and the cost of a full truckload rose by 6.4%. Supply chain leaders must make shipping optimization a priority due to rising costs. Companies can reduce costs by identifying the most cost-effective shipping options for small parcels and large orders. These cost savings not only boost the bottom line of companies, but they can also be passed onto customers to increase customer satisfaction.

📅 Since publication

These percentages describe 2016 to 2017. Freight markets have since been through a pandemic-era boom and a sharp correction, so the specific figures no longer describe current conditions. The argument for optimizing shipping stands; the numbers are historical.

6

Lower overhead costs

Companies can lower overhead costs by stocking low-velocity inventory in order to make space for more revenue-producing inventory. Overhead costs are a significant factor in warehouse fulfillment. These costs can be reduced by optimizing warehouse layouts, using automation solutions that increase productivity, and implementing an improved inventory management system.

Another way to make your operations more efficient is to identify unnecessary spending. Switching to a provider that offers the same quality and service at a lower price is an easy way to save money if you are facing high logistics costs.

7

Improved risk mitigation

Companies can identify potential risks by analyzing both large-picture and more detailed supply chain data. This allows them to create backup plans to be ready for any unexpected situations. Companies can avoid negative consequences by taking proactive steps rather than reacting to disruptions in supply chains, quality control issues, or any other issues that arise. Companies can also be more efficient by understanding risks. 87% of companies, for example, believe that they could reduce inventories by 22% if their supply chains were better understood.

8

Cash flow improvement

Companies can make better decisions, select the right partners, predict market and demand changes, and reduce supply chain disruptions. But that’s not all. They also increase their bottom line. Working with reliable suppliers can result in fewer disruptions, happier customers, and better cash flow. It also allows you to invoice and get paid faster for your products and services. Positive cash flow is also possible by finding more cost-effective ways to reduce waste and lower overhead costs.

Visibility problems or data problems?

Most supply chain blind spots turn out to be integration blind spots — the data exists, in four systems that do not talk to each other.

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