There are so many benefits to applying Supply Chain Management (SCM) to your business or organization. It almost seems like a crime to not have these ideas implemented. You may have an efficient SCM plan in place, but the real problem is the effectiveness. This happens when a business is more interested in the internal process occurring than with the external.
The Difference Between An Effective SCM & An Efficient SCM
The meaning behind these words are completely different, but often times, people confuse them as working together as one.
The definition of efficient is: “performing or functioning in the best possible manner with the least waste of time and effort; having and using requisite knowledge, skill and industry; competent and capable.”
The definition of effective is: “adequate to accomplish a purpose; producing the intended or expected result.”
An efficient SCM is based around the performance of the business or organization. A business might be able to lessen the cost of something, but if it cannot be delivered before the competition’s goods, then it is an ineffective SCM process. This is where the two ideas do not always work together when businesses assume because they are efficient they must be effective.
An effective SCM focuses on the outcomes and standards that are being delivered to the consumers. This means lessening the cost of the goods, optimizing delivery time, and making sure the consumer is happy with their products.
Know The Risks To Watch Out For
A business is not always perfect and a shipping truck might deliver the wrong goods to a business on the wrong day, but don’t make a habit out of it. If you want an effective and efficient SCM system in place, know the risks. There are two risk: internal and external.
- Internal is an issue you can control. This is what you have overall control over like internal communication between employees, business relationships, having back up plans, and knowing your system’s ins and outs.
- External is something that is out of your reach and there isn’t much you can do to control these problems. This is when taxes and regulations change, your shipping time is out of your hands, or there’s a crash in your technology.
Both of these risks need to be controlled as best as possible. If there are a number of external risks, it can start to affect the internal risks and vice versa.
What Having A Bad SCM In Place Does To Your Business
A great SCM helps your business from logistics to overall communication with others. A smoothly-running SCM will help you get ahead of your competition, achieve overall efficiency and effectiveness, keep your consumers happy, and open lines of communication between you and all the manufacturers and organizations you work with for your business.
So, on the other hand, a bad SCM that is in place will cost you money in the long run, weaken lines of communications with your manufacturers and other business partners, affect your overall efficiency and effectiveness, and affect the consumers feelings with your brand or company. All of these issues are problems for the bottom line and staying ahead of your competition.
If you find yourself worrying after reading this article, here are seven tips to improve your SCM system that you currently have in place. These might help to find the underlying issues, and identify whether the issues are internal or external problems.
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