What is Supply Chain and Why is it Important for Business Operations?

A business’ supply chain is the network for the delivery of a product or service from suppliers to customers. It includes all the activities beginning from the supply of resources by a vendor to the delivery of the final product or service to an end-customer.

Supply Chain Management or SCM

Supply Chain Management (SCM) involves management of all the suppliers, manufacturers, and sellers who eventually deliver the end-product to a market. Proper management of this chain is one of the ways how you can avoid business burnout.

Different levels of SCM

The SCM involves 5 levels, which are technically known as flows.

  • Material flow

Material flow involves the movement of a product or service from a supplier to a consumer.

The item may originate from one vendor and move to another company for assembly. It arrives at another company’s inventory. The product then moves to another location for finishing. Finally, it reaches a distributor from whom consumers can avail that product or service.

The above process is downstream – from its origination to consumption. It might also go downstream – from consumer to the origin – during a return.

  • Financial flow

The financial flow involves the movement of funds from the business towards its vendors and the retailers back to the firm. Optimising this financial flow, thus, leads to an increase in revenue and return on investment.

  • Information flow

The products or services moving from suppliers to customers require ample backing of information. Such information can include financial data, product information, supply documents, scheduling data, delivery reports, etc.

  • Value flow

Each stage of a supply chain through which a product or service moves adds more value to it. A retailer also adds value to the item by making it available to the public through his/her shop.

  • Risk flow

With value, each stage also involves risk in the chain. Whoever holds a product at a time is prone to risk. Some risks that arise due to poor quality or high price of a product, lack of funds, delayed accounts payable/receivable, etc. are controllable. However, macroeconomic factors like inflation, natural disasters, etc. are uncontrollable.   

Importance of SCM

Optimised SCM can help a business in the following ways:

  • Increases profit

One of the significant benefits of SCM is an increase in profit. It can help improve your cash flow, necessary to build a successful manufacturing business. SCM also decreases the cost involved in the entire chain to influence gains.

  • Decreases operating cost

A firm regularly requires investments to stay in business. Such investments include all the expenses in a supply chain. SCM decreases operating costs to increase revenue and profit.

  • Improves customer service

SCM also improves customer service to ensure that consumers receive the right quality, quantity, price, and on-time delivery.

Supply chain loans – A customized way of financing

You can take supply chain finance to address financial gaps in your SCM. These loans are available with prominent financial institutions in India. Some of the features that you can enjoy include:

  • Ample financing options to meet your needs

You can avail up to Rs. 30 lakh with Supply Chain Finance from NBFCs. Such high amounts can help you procure resources, increase working capital, streamline logistics, etc.

  • No need to pledge collateral  

Lenders provide you financing without the need to pledge any collateral. Thus, you get to exercise full freedom over your assets.

  • Quick approval and rapid disbursal

Lending institutions can approve your application in 5 minutes and disburse the funds within 24 hours if you meet all eligibility criteria. These loans are also exceptional for financial emergencies in business.

  • Pre-approved offers

Lending companies offer Supply Chain Finance up to Rs.30 lakh with pre-approved offers which save considerable time when availing fund by making the process hassle-free.

  • Convenience when you repay

Supply chain finance is short-term and comes with repayment tenors that range from 12 to 60 months.

  • Minimal eligibility criteria

You only have to be between the ages of 25 and 55 years with a business vintage of at least 3 years to apply. Also, a credit score of 750 or above is essential to qualify.

  • Only a few documents needed

Lenders only require your KYC documents, business proof, financial documents, and bank account statement.

Avail this types of business loan and ensure that your supply chain remains operable throughout inflation or any downtime.

Author

Shubham is a passionate blogger. He has expertise in writing finance articles. He have been serving society as a financial adviser. He loves keeping himself up-to-date with the news and happenings around. He is always open to learning and shares his experiences on his Greetings of the Day.

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