Supply Chain Management- A Depth Guide

 Supply Chain Management- A Depth Guide

A supply chain is a business process that links manufacturers, retailers, customers and suppliers in the form of a chain. Supply chain management can be defined as the process of planning, implementing and monitoring the everyday operations of a supply chain. It encompasses the process of availability of raw materials, their processing into finished goods and the distributions. The main aim of supply chain management is to provide the highest level of satisfaction to the customer and maintain good relationship with suppliers. Thus, it increase the business of the company and emphasizes the right product at the right place at the right time at the right measure and at the right quantity.

In simpler terms, supply chain management generally makes a business run smoother. For instance, if issues surrounding are reduced, productivity is increased and money isn't lost, then this is an example of how supply chain management can benefit a company. As long as there is a strong relationship between the business and manufacturers, the product will have a better chance at doing well. After all, supply chain management involves every step of the supply chain process - from manufacturing to delivery.

Supply chain is a dynamic process and involves the constant flow of information, materials, and funds across multiple functional areas both within chain members. Supply chain management also emphasizes the important linkages between the manufacturer and the distributors as well as the customers.

When you say supply chain, you should think about an entire network of specialists, including suppliers, factory workers, warehouse managers, people working for distribution centers and retailers, plus customers. They all take part in the production process starting from raw materials to the finished goods. Supply chain management covers all these aspects, people and the activities are involved. From sourcing to procurement of materials and supplies, from transition and transportation. All these activities and processes are subjected to it.

Supply chain management is supposed to be undertaken by the high level management committee of the company. Decisions for supply chain management can be classified into two broad categories; strategic and operational. 

Strategic decisions are made typically for a longer time period. These are closely linked to the corporate strategy and supply chain policies. On the other hand, operational decisions are short term and focus on activities over a day-to-day basis.

The problems that the supply chain system is supposed to address includes the following:

  • Distributor Network Configuration:

Quantities and locations of people involved with the entire process of the supply chain including the suppliers, customers, warehouses, production facilities and distribution centers.

  • Strategies for distribution

Centralized, direct shipments, push and pull strategies, cross docking and third party logistics.

  • Information:

Integrating systems and processes through supply chain to share relevant and significant information consisting of demand signals, forecasting, transportation and of course, inventory.

  • Management of inventory: 

Number and location of inventory and also covers raw materials, finished goods as well as work in progress.

  • Management of customer relations.
  • Management of customer service
  • Management of demands.
  • Fulfillment of orders.
  • Manufacturing flow management.
  • Management of supplier relations.
  • Developing the product and commercialize it.
  • Managing returns.

Other key business processes which are used as supply chain procedures and are a vital part of the process and include:

  • Customer service management:  which is Steps used by companies to build successful customer relations include focusing on mutually satisfying goals; establishing and maintaining customer relations; produce feelings of positivity and trust between the customers and organization.
  • Procurement processes.
  • Product developing and commercializing: This includes coordinating with customer relationship management to identify customer articulated needs, selecting suppliers and materials and developing production technology to integrate and produce the best supply chain flow.
  • Manufacturing flow management processes.
  • Physical distribution.
  • Outsourcing and partnerships.
  • Performance measurement regarding cost, productivity measures, customer service, asset measurement and quality.

There are 5 different stages in supply chain management:

1. Plan: Strategies and business plans are made in order to carry out the remaining stages efficiently. Strategies are devised by the supply chain managers of the company devising best policies and strategies for the business.

2. Develop: Strong relationships and business terms are developed with the suppliers for long term relationship. Various suppliers are assessed upon many factors, price, quality, timely delivery and ability to deliver in bulk quantities.

3. Make: The product finally gets to the manufacturing process to be made according to high quality standards and specifications conforming business standards.

4. Deliver - The product is finally delivered to the client either on order or in batches. These products are made and delivered upon the highest standards of quality control and planning making client happy regarding the product.

5. Return - Client/customer would return the good or product back to the company if it fails to meet certain quality control criteria. The origination gets in touch with the customer to record and keep a track of his/her complaints so that the company's SCM and Complaint center department together deals with the issue and get it sorted out as quickly as possible. Guarantees and product warranties are then sued by the customer to either regain a new product or get the existing one repaired free of cost.

Why Supply Chain Management is Important?

The importance and need of SCM has increased because customers demand faster, timely delivery of orders and more. As global competitions are increasing, customers have different choices & needs to satisfy demands. Without the use of supply chain management, there would be no effective way to sell a product & consumer satisfaction. Every running business needs this, since the supply chain will never go away. 

Supply chain management systems are crucial for anyone who wants to have great and loyal customers. However, building strong relationships with an audience is not the only thing you need to do. By creating a structured supply chain management solution, you are forming bonds with manufacturers, marketers, and so on. If you are smoothly running your business, and following every step of the supply chain, chances are you will be networking with other top players and succeeding. In order to be a successful business, you must remember that the way your company operates is just as important as making money.

Supply chain management also monitors the production process of the company by ensuring regular supplies of high quality raw material in timely manner to be converted into finished goods. In order to make this process as success, a separate business department of business is assigned that is known as the supply chain management. This department works just like other departments of the business but has everything to do related with the production department of the business.

overall, In today's rapid and dynamically changing world, ensuring regular supplies to meet consistent fluctuations in consumer demands has been defined as one of the most crucial aspects of any business if it wants to be successful enough to compete in terms of quality, price and competitors. For companies involved in the manufacturing sector SCM is the most important business department and in fact has been termed as a necessity to regulate the supply chain aspects of the business smoothly and efficiently. Nowadays business need not only lower costs in order to stay ahead in the ocean of cut throat competition, they also need to develop uniquely devised built-in competitive edges in order to be successful. Today only those businesses are successful that makes competitive policies in timely manner in accordance with the highly volatile consumer market.

The importance of supply chain is valued very high that the Japanese auto giant Toyota had been consistently applying regular set of SCM policies in order to take over the completion by maximum utilization of its resources. As a result the company has efficiently been able to beat Ford of the USA. Various advantages exist of supply chain that makes it an important aspect of any business

1. Value added concept - SCM has been successfully able to add value to the production process by minimizing the production time in order to incorporate creativity and innovation to produce better products in the long run.

2. Increased profitability - Efficient use of SCM polices results in lowered costs and rising profits. Big costs in terms of supplies are time and the price of raw materials. In order to save on finance, the company would have long term business relationships with its most valuable suppliers that would supply high quality bulk raw materials on time to the company so that the company can produce different products. This results in saving of time and costs by not hiring different suppliers on the daily basis.

3. Adjustment in trends - Companies involved in the fashion industry like cosmetics, perfumes, textile, garments etc are subject to high fluctuations in seasonal demands of products. As seasons change so do people's preference of cosmetics and fabric changes. As a result supply chain has to effectively plain well ahead in time for the upcoming trends to get the manufacturing process adjusted. This can be achieved by clearing out stock on sales of previous items and going in quick manufacturing of new fabric to adjust to the new seasons.

4. Time saving - Efficient use of SCM results in big savings on time so that the customer gets only the type of products that he/she wants.


Key Drivers of Logistics Supply Chain Management

From analyzing different journal articles, textbooks, web research, I found the key drivers differ according to different perspectives which are Globalisation, Sustainability, Cost- awareness, Customers, Suppliers, Technology and Transportation.

Globalization:

The external forces (i.e. political, economical, socio- cultural, technological, legal and environmental), local competition, continuous policy and regulations changes, pressure from international brands and all effects to meet the consumer demand in market. Thus, companies are facing huge challenges to meet the requirements globally. Though the product barriers are eliminated, no products are now considered domestic products but due to globalization forces companies tend to change policy and strategy regularly. Besides, with the benefits from globalization now, foreign investors are encouraged to invest in several countries which forces local companies to improve quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for the companies.

For instance, a company can develop a product in the US, manufacture in China and sell it worldwide, i.e. Apple. This makes a complex and challenging activity for the company. Thus, in order to maintain global demand Apple makes strategic choices to build global manufacturing and engineering infrastructure in California, Ireland and Singapore to capture markets in US, Europe and Asia. This global strategy from Apple allows the company to take advantage of capturing a large market. This strategy allows Apple to become the number ONE innovative company in the world.

Sustainability:

Creating a sustainable chain has a major concern for companies. Constant variable pressure from regulations, geographic in nature, socio- economic impact, international policies and principles in general is complex for managing Supply chain management

For example, green environment (i.e. carbon emission); local governments are always imposing regulations which affect the manufacturer. For instance, production and manufacturing in developed countries like in Europe is a huge challenge because of strict rules and policies of environmental issues compared to underdeveloped countries like in Asia. For example, in the automobile industry producing vehicles is challenging because of environmental issues in different countries.

Cost-Awareness:

There are four major decision areas in cost awareness:

1. Location: Convenient feasible location with availability resources including all facilities is the primary step towards creating a strategic network. However, due to geographical distance and cost, companies often weren't able to cope up with customer expectations.

2. Production: Cost fluctuation from production levels are critical issues for strategic decisions, such as what product to produce, which plant to allocate and what supplies to get for production.

3. Inventory: Inventory cost varies at different levels starting from raw materials to finished goods. Cost is also associated in buffer stock, safety stock or even days of inventory in hands as well as price increases during the periods of inflation affects.

4. Transportation: 30% of logistics cost associated with transportation that makes the companies think about distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is cheap but time consuming.

Customers:

Customers are the most unpredictable variables to determine demand. Frequent changes of demand, new expectations, changing approach of existing product, influential behaviour attitude towards products are all determined to develop a customer-product innovation strategy. For example, Apples starts it business on the bases of computers but after understanding demand of consumer, they launched iPhone, iPad, iPod as means of innovations strategy which satisfy customer but not merely makes the customer delight but introducing facilities like ITunes, music, software application gradually capture the market the whole market.

The example here provides a key learning tool how the company understands its customer to achieve competitive advantage' which makes us think about what strategy they are following. In Apple strategy most of the iPhone and iPad items (i.e. parts) are outsourced. More precisely speaking, very few components are created by Apple, hardware is supplied by contract manufacturers and software is supplied by millions of software developers to build various applications for the devices which minimize the cost.

Suppliers:

Supplier's motivation is important for quality, cost and delivery expectations of producing product with value as they have a greater influential aspect of supplying items. For example, Dell's direct strategy requires processing orders directly from customers. Dell's pull strategy to build computers on customer's specifications and deliver within time. To support this model, Dell asked suppliers to keep inventories within 15 minutes of the manufacturing locations. Virtually all products are made to order. Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. That means there is almost no inventory of parts or products in the factory and this happens only because of healthy relationships with suppliers.

 Technology:

With the benefit of technology, customers are now becoming more technological oriented focusing on online trading, online shipping, online payment, online information, online virtual chatting, and so on. This technological process has a greater impact on customers and nowadays customers are constantly willing to get more information, answers, about their choice, preferences. Dell's could be an ideal example, how technology impacts on business and increases revenue. The success of Dell's direct sales strategy depends mostly on continuous development of technological aspects as the customer is willing to become more connected, assist them to develop cost effective quality product strategy.


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