8 Benefits of Supply Chain Management (2024)

Let’s speed through a typical supply chain process—say, olive oil, tracing the product’s path from Mediterranean groves to kitchen pantries. Sun-ripened olives are harvested by farmers. The yield is then transported to local presses, where it’s turned into rich oil. Next, the fresh oil is bottled, shipped to distributors worldwide, and finally delivered to specialty food shops and grocery stores.

Throughout this journey, timing is everything. When each link in the chain operates smoothly, customers enjoy the finest olive oil in their salads. But if there are transportation delays, the olives could lose freshness; if the bottled oil is mishandled, the bottles could break—a costly loss of product. This is why supply chain management is so important.

Here’s how implementing effective supply chain management practices can unlock benefits for your business, from cost savings to improved customer satisfaction.

8 benefits of supply chain management

1. Improved customer communication
2. Streamlined logistics and distribution
3. Lower costs
4. Strengthened supplier collaboration
5. Customer satisfaction and loyalty
6. Flexibility to meet changing demands
7. Sustainability and ethical responsibility
8. Revenue growth and profitability

Effective supply chain management involves coordinating the flow of goods, information, and finances. Here are eight key benefits of the supply chain management process:

1. Improved customer communication

Supply chain visibility lets you monitor your materials and products as they travel from suppliers to customers. Imagine running a custom furniture ecommerce company. Implementing supply chain visibility tools, like real-time tracking, can help you quickly identify and address any potential disruptions, like a delayed shipment of wood due to a transportation strike.

With this level of visibility, you can get in front of disruptions with your customers. For instance, if a shortage of oak threatens production, you can swiftly inform customers who’ve placed orders for oak furniture, offering them alternative products or updated delivery timelines. This proactive approach demonstrates your commitment to transparency and customer satisfaction, even in the face of supply chain challenges.

2. Streamlined logistics and distribution

Distribution is an important midpoint in the supply chain, connecting initial production to final doorstep delivery. An inefficient logistics and distribution process can result in delayed shipments, misplaced packages, and unhappy customers. Implementing supply chain management tools like transportation management systems (TMS) and warehouse management systems (WMS) improves route planning, carrier selection, and shipment consolidation within your supply chains.

An electronics ecommerce company using an intelligent order routing system can swiftly ship a customer’s urgently needed new smartphone from the nearest warehouse, ensuring speedy delivery and a delighted customer.

With data analytics and predictive modeling, supply chain managers can also anticipate and address potential bottlenecks, strategically locate distribution centers, and collaborate with logistics partners to improve last-mile delivery. Continuously monitoring and refining these processes enables you to improve overall supply chain efficiency, reduce costs, and deliver an exceptional customer experience.

3. Lower costs

Reducing waste and improving efficiency can cut costs across your entire supply chain operation.

Let’s say you run a mid-sized furniture company grappling with escalating wood prices and shipping costs that have increased your production expenses by 15% over the past year. This makes it difficult to match the lower prices offered by large-scale home furnishings manufacturers. An in-depth analysis reveals that inefficiencies plague every stage of your supply chain, from inconsistent wood quality because of multiple small suppliers to your aging cutting and sanding machines that slow down production and compromise precision. As a result, you see a high number of customer returns due to imperfections.

Here are key questions supply chain professionals ask about each stage to help lower costs:

• Procurement. Can you consolidate suppliers to lower your shipping costs or negotiate a volume discount? Are there alternative raw materials or suppliers that could offer higher quality or lower prices?

• Production. Would new technology and tooling allow you to automate manual work or improve the quality of your product? Are your employees properly trained on all the technology your business uses?

• Warehousing. Is your warehouse layout set up for efficient pick and pack fulfillment? Could you implement a warehouse management system to reduce errors and boost inventory accuracy? 

• Distribution. Are there opportunities to consolidate shipments to cut transportation costs? Would partnering with a third-party logistics (3PL) provider be more budget-friendly than managing distribution in-house?

• Collaborative planning and forecasting. Are you regularly reviewing sales data to adjust your inventory levels? Is there an alert system in place to flag when inventory of key items is running low?

Take a hard look at each of your supply chain management processes. Ask these questions, and you’ll likely spot some ways to cut costs and run more smoothly.

4. Strengthened supplier collaboration

Despite the technology powering ecommerce sales, parts of the supply chain remain non-digital and inefficient. This became evident in 2020 when the COVID-19 pandemic forced many businesses to adopt digital solutions in the absence of team meetings and supplier site visits. During this transition, 15% of procurement leaders reported challenges in establishing communications externally with suppliers.

Yet, companies that invest in strong collaborative relationships throughout their supply chains demonstrate greater resilience and adaptability; research has shown that businesses with advanced supplier-collaboration capabilities consistently outperform their peers. One key way to achieve this aim is by investing in technology within your supply chain. For example, a supplier relationship management (SRM) system lets you share real-time information and track performance, making it easier to identify areas for improvement and provide timely feedback to suppliers.

If you partner with a manuka honey supplier to produce your honey-infused hair care line, an SRM system can allow you to share real-time supply and demand data and track key performance indicators (KPIs) like on-time delivery and product quality.

5. Customer satisfaction and loyalty

Customers rarely consider the intricate aspects of supply chain management, like inventory optimization or the complex routes involved in getting a package from the warehouse to their doorstep. Their primary concern is receiving the goods they purchased within the timeframe you promised them.

Accurate inventory forecasting ensures the right products are on hand, while efficient warehouse management and transportation networks get products where they need to be. Technologies like RFID-enabled inventory tracking can instantly alert staff about misplaced shipments, while warehouse robotics can reduce errors and speed up order fulfillment.

Your supply chain is working when customers simply experience the result of these processes working together. By getting it right time and again, your business can build trust and loyalty, ensuring customers return to you for their next purchase.

6. Flexibility to meet changing demands

Companies with flexible supply chains can better weather market storms, dodge disruptions, and keep pace with what customers need and want. For example, a popular cosmetics brand might depend on a single supplier for its star ingredient, a rare Amazonian berry extract. If this supplier encounters issues like a crop failure or a logistical breakdown, the cosmetics brand may struggle to produce its bestselling skin care line, leading to stock shortages and disappointed customers.

Conversely, competing brands that have a diverse network of ingredient suppliers can swiftly adapt to market demands, ensuring a steady supply of their products on store shelves. This supply chain resilience allows them to seize the opportunity to attract their rival’s frustrated customers and expand their market presence.

Good supply chain management builds flexibility into your ecommerce operations, allowing you to respond swiftly to market changes and customer needs. This agility can be achieved through:

• Diversifying supplier networks to mitigate disruption risks

• Implementing demand forecasting tools to anticipate shifts in customer preferences

• Establishing flexible manufacturing processes to adapt to new product requirements

• Developing contingency plans for supply chain disruptions

• Fostering close collaboration with suppliers and logistics partners for rapid response

Investing in these strategies and tools creates a more resilient and adaptable supply chain, ensuring you meet evolving customer demands and maintain a competitive edge.

7. Sustainability and ethical responsibility

In an opaque supply chain, unethical practices like child labor, environmental harm, and unsafe working conditions can go unnoticed. Conflict minerals from the Democratic Republic of the Congo often end up in electronics, while Uzbekistan’s cotton industry was associated with forced labor until 2022. Consider these strategies to prioritize transparency and sustainability in your supply chain operations:

• Regular supplier audits. These audits help identify and address any unethical practices, unsafe working conditions, or environmental concerns within your supply chain, allowing you to take corrective action and maintain your reputation.

• Sustainability reporting. This type of reporting quantifies your company’s environmental and social impact, tracking metrics like carbon emissions, water usage, and waste reduction across your supply chain. This provides you, your partners, your investors, and your customers with a clear picture of your operations and commitment to responsible practices.

8. Revenue growth and profitability

While improving supply chain management may involve upfront costs, it drives long-term revenue growth by consistently delivering high-quality products on time, fostering a loyal customer base instead of securing one-time purchasers.

Implementing inventory management software, optimizing warehouse flow, and improving route planning all require time and money that may seem to detract from other areas of your business.

However, the costs of poor supply chain management can be even more significant. Delivering the wrong package to customers leads to expensive replacement shipments and the hassle of reverse logistics. Investing in marketing campaigns and paid advertising only to lose customers due to low-quality products from unreliable suppliers is a waste of resources. The long-term benefits of effective supply chain management far outweigh your initial investment.

Examples of successful supply chain management

Supply chain management can make or break your company. Two brands—City Seltzer and Great Wrap—demonstrate how strong distributor relationships and production control can drive remarkable growth and sustainability:

City Seltzer streamlines distribution through direct relationships

City Seltzer, an Ottawa, Canada–based beverage company, shows how streamlined logistics and distribution can drive growth. Cofounder Josh McJannett used his experience from Dominion City Brewing to create an efficient supply chain model for his seltzer brand.

By cultivating strong one-on-one relationships with bars and restaurants, City Seltzer eliminated the need for middle distributors, a company practice in the US market. “We had a very direct relationship with the bars and the restaurants that took our product,” Josh says on an episode of the Shopify Masters podcast. “You’re actually able to sell a keg of beer and drop it off to the bar that buys it directly. So that’s been in our DNA. That was a real advantage at the beginning because it was second nature for us to go to the bar manager or the restaurant owner and say, ‘Hey, try this.’”

This direct-to-customer approach makes for a simple and efficient distribution process:

• Reduced costs. Eliminating intermediaries lowers overall distribution expenses.

• Faster delivery. Direct delivery guarantees that products reach their customers quickly.

• Better communication. Face-to-face interactions with buyers mean feedback is immediate and issues are resolved quickly.

• Flexibility. The company can adjust production and distribution based on real-time demand.

By directly interacting with customers, Josh and his team reduce supply chain complexity while also building stronger customer relationships.

Great Wrap fosters supply chain transparency

In 2019, Julia and Jordy Kay cofounded Great Wrap to create a plastic-free version of traditional cling wrap. They partnered with Monash University in Melbourne, Australia, for research, eventually discovering a way to turn potatoes into compostable stretch wrap. This collaboration paved the way for an eco-friendly alternative to single-use plastic.

After briefly working with a production partner, the Kays decided to take complete control of their business to increase supply chain transparency and prevent greenwashing. They started their own production facility with a small amount of savings, help from angel investors, and government grants.

“It’s hard to control another business’s operating practices as a customer. If you want to make a product that you have true control over and what goes into it, it’s going to be easier to set up a manufacturing facility,” Julia Kay says in an episode of the Shopify Masters podcast. “We wanted to experiment with our feedstocks and know everything that went into our products. We were also really excited about creating jobs, too.”

This vertical integration strategy allowed Great Wrap to have full oversight of its supply chain, from raw material sourcing to final product manufacturing, ensuring consistent quality and alignment with its sustainability mission. Today, it’s a B Corp–certified business that demonstrates environmental stewardship in its supply chain.