More than 50% of companies believe that supply chain management is a source of competitive advantage for their organizations.
Especially in a highly competitive market, supply chain management can be the difference between success and failure. So it’s not surprising that firms are willing to spend $4.8 billion worldwide on supply chains by 2025.
What is supply chain management (SCM) and why is it important to your distribution business?
Before I dive in, I just want to say my A.D.D. just kicked in and, is it just me, or is that a beer in the photo?
This article by ATS Logistics gives a good definition what is supply chain management. They point out that understanding supply chain management requires a good understanding of its key components: planning, sourcing, making, delivering, returning and enabling.
Supply chain management is handling and optimizing all the many complicated facets of a supply chain, involving goods and services. Even ensuring timely handoff from manufacturer to shipper to supplier to shipper to buyer is a massive task, but to do it cost effectively and build net value is truly a challenge.
Benefits of SCM
How does supply chain management fuel your operational success? In a number of ways. I’ll talk the most about Price Optimization because these solutions use machine learning, which most would agree is a sexy topic!
- It has been proven that just a 1% change in price can have over a 22% change in gross profits.
- As part of an SCM strategy, price optimization tools enable you to make slight pricing tweaks across large assortments and channels. Very easily and accurately. Even with large assortments, these technologies enable a distributor to intentionally shape demand… You can lower prices to dispose of those that don’t sell, and raise prices on fast movers to increase margins.
- You can also keep an eye on the performance of your products, as well as competitive pricing and e-commerce prices, and quickly respond to any dynamic changes.
- Price optimization tools also allow you to segment pricing by willingness to pay, and vary prices across different channels and locations.
Using machine learning algorithms,
“SCM solutions help you implement forecasting techniques that alert you when you need to employ price variation to close out lagging inventory. Even though you sell the products at a steep discount to offload it, it’s better than writing off. Thus, such price optimization can help buoy your top-line better during adverse sales cycles.” – ATS Logistics
Three other benefit areas for supply chain management are:
Cost Efficiency
Better Customer Service
A Lean Fixed Asset Ratio
I’ll save those for another day.
In the meantime, I invite you to check out Blue Ridge’s Pricing Optimization solution.
Blue Ridge Pricing delivers advanced science and calculating power to test the impact of a price change across your entire assortment. Quickly identify overpriced and underpriced products. Deplete inventory and boost margins. Get the upper hand in supplier negotiations. And drive revenue opportunities through pricing that is both competitive and profitable.
If Price Optimization tools are not in your SCM strategy, it’s time to take a look!
