Supply Chain Management in the 21st Century

19th century warehouse in Frankfort, Kentucky,...

Image via Wikipedia

With so many companies looking to save money, supply chain management is becoming more popular, especially for smaller companies. Certainly it is necessary to still maintain a facility for producing the products, but there is no longer a need to maintain a warehouse and fleet of trucks for shipping.

In fact, even some retail chains are hiring supply chain management companies to store their overstock in order to prevent the need for warehousing. Where is the cost savings if a company is going to pay someone else to store and ship their products?

Making the choice to contract supply chain management is not one that most companies make overnight. They more than likely sit down with their accountants and business managers in order to evaluate the current costs against what it would cost to eliminate the costs of of not switching to a fulfillment company.

Costs that businesses must take on if they handle their own order processing include keeping a  fleet of trucks and accompanying personnel, maintaining warehouse space, hiring customer service staff, and negotiating deals with shipping vendors. The services your company contracts depends upon their individual needs and can range from nothing more than providing a place to store overstock and shipping to customers as needed to even handling payments from the customers to whom you ship.

In the past companies would not have considered hiring anyone to handle supply chain management functions unless the company was very small and did not have the means to rent warehouse space. The more expensive overhead becomes the more companies are looking toward eliminating any functions for which they cannot justify the cost. They look at supply chain management providers not as a way to eliminate unnecessary payroll expense but as a way to save money for the company in the long-term. Being able to save money today means they will be in a better position to provide higher salaries and better benefits to their remaining employees.

Many changes have occurred in the 21st century, and supply chain management is no exception. The changes that have occurred have allowed some companies to maintain profitability while others have been able to begin operations with a lower initial capital expenditure. When a company can put out less money in warehousing it has more money to maintain a staff of good people to handle quality production, a task that will assure a continuous flow of customers in the foreseeable future.