Why Is It Important to Study Supply Chain?
In the past few years, disruptions have rocked the global supply chain. Increased demand for delivered goods challenged manufacturing centers’ abilities to keep up. Restrictions slowed transit and worker shortages caused deliveries to back up in ports.
These disruptions made the mainstream news and brought the term “supply chain” to an inconvenienced general public. Businesses realized how much their bottom lines depended on skilled supply chain management, and professionals began to see the value in developing supply chain skills.
If you’re looking to advance your career, your business, or just your understanding of how commerce works, studying supply chain can help you achieve your goals.
What is supply chain and why is it important?
Supply chain includes all the steps necessary to deliver a final product to the customer. End-to-end, it includes:
- Procurement: Selection and sourcing of raw materials
- Inbound logistics: Delivery of materials to manufacturers
- Warehousing and inventory management: Minimizing delays in materials and product storage
- Outbound logistics: Transporting manufactured products to distributors, retailers, and ultimately customers
- Forecasting: Evaluating customer responses and predicting demand, with the goal of managing inventory levels correctly
Every step in the supply chain depends on those that come before it.
Impacts of a supply chain crisis
A delay at one touchpoint can cause multiple disruptions downstream, even circling back to interrupt early supply chain stages in the next production cycle.
For example, when a tsunami hit Japan in 2011, multiple auto parts suppliers had to shut down. Many companies ordered their parts from a single company, making their supply chains unsustainable.
Production plummeted for automakers across North America, Europe, and China. Honda’s output dropped 81% in a single month, and Toyota’s dropped by 74%.
Honda returned to full capacity fairly quickly, largely because knowledgeable professionals quickly stepped in to fix its supply chain. The company gave resources to impacted suppliers while helping still-operational suppliers to fill in the gaps. Honda and Toyota both took the opportunity to strengthen their supply chain, a move that has greatly improved their resilience in the past decade.
What can supply chain improvements do?
A well-managed supply chain is about more than just pivoting when necessary. It’s also a key way companies streamline business processes and improve cash flow. Here are some of the biggest benefits:
Reduce operating costs
Inefficiencies like delayed deliveries and overstocked inventories can cost a company thousands of dollars or more. An efficient supply chain helps:
- Keep goods in motion, reducing inventory and warehousing costs
- Avoid costly shutdowns by ensuring raw materials reach factories
- Forecast consumer demand to reduce unnecessary materials purchasing
- Design efficient networks to reduce the need for expensive warehouses, equipment, and other fixed assets
Small supply chain cost reductions can significantly reduce expenses when they happen at scale. Production that costs two cents less per unit saves $20,000 per year in a company that ships out a million units.
Supply chain management is also about reducing total time between raw materials sourcing and consumer delivery. The faster a supply chain is, the more sales a company can make.
Brands with a reputation for quick delivery have an advantage in the consumer market. Companies like Amazon, Target, and Walmart are the clearest examples.
Boost customer satisfaction
Customers expect goods to be in-stock and delivered on time. Supply chain problems cause delays in manufacturing and result in lost sales, particularly when customers respond to late shipments by canceling.
With a well-managed supply chain, companies can anticipate ordinary delays and pivot quickly when the unexpected happens, maintaining customer goodwill.
Increase competitive advantage
Supply chain managers can create networks that deliver top-quality products at the lowest reasonable cost. One of the best-known examples is Dell Computers, which uses a direct sales model to manufacture the exact computer a customer wants.
Dell has used this model to gather a steady stream of information from multiple sources—customers, sales teams, and suppliers. The company uses that information to understand what customers want and how prepared suppliers are to meet those needs; their understanding of the supply chain lets them retain loyal customers by delivering goods on time.
Why is learning about supply chain important?
Effective supply chain management, also called SCM, directly impacts company success. It improves business management, facilitates decision-making, and leads to more efficient business operations. But its benefits go far beyond the everyday:
Proactive crisis management
The more a company knows about its supply chain network, the more effectively it can pivot in times of crisis.
Take Amazon, for example. The global retail leader has access to data and technologies that give it an unparalleled view of the supply chain. As a result, it’s been able to respond more proactively to the recent supply chain crisis and emerge victorious. It has:
- Offered sizable sign-on bonuses to evade the holiday worker shortage.
- Avoided competition for shipping containers by building its own containers
- Anticipated demand at popular ports and diverted shipments to avoid delays
- Leased long-haul planes to hasten delivery of its highest-ticket items
Measures like these keep Amazon synonymous with fast, reliable delivery.
Reliable delivery of essential services
Supply chain isn’t just about delivering fun Amazon packages. People around the world rely on the supply chain to deliver essential goods such as food, medication, clothing, and even clean water.
Natural disasters and crises like the coronavirus pandemic can interrupt these deliveries when they’re most needed. After the 2011 Japanese tsunami, for example, petrol shortages caused food shortages, and supermarkets had to limit bread sales to two slices per buyer.
Advanced supply chain skills keep essential services moving even in the face of major challenges, saving livelihoods and lives.
Shipping produced 11% of the world’s carbon emissions in 2020, while medium to heavy trucks produced 22%. Transportation is also a major consumer of energy, accounting for 26% of all energy use in the U.S. alone. Supply chain decision makers can choose more sustainable shipping methods and efficient routes.
Why study supply chain management?
In almost any industry, supply chain skills can make team members more employable and offer opportunities for advancement. According to the U.S. Bureau of Labor Statistics (BLS), the next 10 years will bring a 30% growth in jobs for logisticians, the professionals that manage companies’ supply chains.
In a recently released survey, 95% of young supply chain professionals expressed excitement about the field and 97% said they would recommend the career to others. It’s a lucrative field that pays an average of $95,000, according to Zippia.
Supply chain management skills can also open the door for career opportunities in many related fields, including:
Supply chain skills benefit professionals in most areas of operations and management. The more you know about the real-time movement of materials and how to work with supply chain partners, the better your business decisions will be.
Should I study supply chain?
If you’re interested in logistics, business analytics, transportation, or operations, a supply chain education will give you a real advantage. You can complete stand-alone courses or go further and pursue a professional certificate program or even a degree, all without quitting your current job or even leaving your home.
edX offers supply chain management courses and programs from some of the world’s top institutions, including MIT and Imperial College London. Boost your current resume and take the first steps toward a new career—one that will always be in demand.