Question

Discuss the financial implications of supply chain strategies on overall business profitability

Answer 1

Financial implications of supply chain strategies on overall business profitability:

Supply chain management refers to the integrated arrangement between various entities (like vendors, carriers, third parties, IT companies etc) to enable production, procurement, processing and marketing of products.

1. An effective supply chain management ensures that the product is finally delivered to the customer at the right place and time, and also ensures that the entire process is cost effective, i.e, reducing the cost of production per unit.

2. Reducing cost also inculcates reducing the response time between various parties involved in the supply chain.

3. Cost reduction will in turn lead to an increase in the net profit (assuming selling price remaining constant) of the Company and hence the overall business profitability shall be improved.

4. Better supply chain management procedures also ensure a sharp reduction of damage to products during transit/transportation.

5. Integrated and well coordinated supply chain ensures that the entire production process runs smoothly leading to good business relationships with the parties. Ultimately all this shall lead to increase in sales as well.

6. Dissemination of advanced technology among the supply chain partners. Win-win situation for all.

7. Transparency of supply chain and tracking the source

8. Increased control over product quality