Supply Chain Management - Essay Example

**** **** **** 12 Dec Supply Chain Management Introduction Supply Chain Management is one of the main pillars on which, a business relies heavily to be successful and maintain the success over long periods of time. In today’s modern era of stern competition and volatile economy, every business has to have well planned strategies to ensure the basic concept of running a successful business, which is to lower the cost of running and generating maximum profits through optimum customer satisfaction. The current and future demand need to be strategically predicted based on the facts and happenings in the market, giving due consideration to unexpected events that might have a major effect on the market demand. After the organization has a thorough understanding of the demand, the supply of raw material and the processed goods need to be planned so as to make sure that the inventory at all times is maintained to meet the demand. It is always necessary that the inventory does not get too out of hands and is not short of the predicted demand at the same time. Definition Supply Chain Management refers to the entire process and stages that go in the supply of goods and services. To coordinate the production and market supply. It refers to the management and integration of all operations within and outside of the organization to maintain the entire supply chain, like production of goods, entire process of inventory stocking, procurement of raw materials from various suppliers outside the organization, transportation and distribution of raw and readymade goods in a cost effective manner, so as to ensure the overall cost of production can be kept low, in turn resulting higher profit margins. In addition to the scope mentioned as above, one of the most important functions of the supply chain management is to draw business boundaries and define the scope of the business, which will allow an organization to analyze and understand the feasibility of carrying out a certain production function in-house or outsourcing the stage for better results. According to Mentzer, et al: "Supply chain Management (SCM) is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purpose of improving the long-term performance of the individual companies and the supply chain as a whole" (Ballou 5). Functions The main roles of supply chain management can be understood by dividing them into the following heads: Identifying the Scope and Feasibility Demand and Supply/Adequate Inventory Logistics Procuring and purchasing Production Sales The primary role of supply chain management is to observe and analyze the existing operation cycle of an organization and then define the scope of the various stages and aspects of in-house production. This is done to understand the feasibility of outsourcing some stages of operation to a third party in order to keep the cost low, get better quality products and get the finished product in a limited time, so as to ensure smooth running of the organization. Demand and Supply as discussed are at the core of any business defining its market existence and sustenance. The key is to meet the current market demand and have adequate stocks to meet any sudden changes in the demand curve, yet ensuring that the stock inventory goes too high that it starts affecting the overall cost of production. Obtaining, storing, transporting and then distributing are the core functions in the logistics function of the supply chain management. Fetching and transporting the raw material to the production site and then storing the finished product in the warehouses to finally getting the products distributed to be consumed directly by the consumer are some of the functions of the logistics that in turn have a major affect on all the other stages in the entire supply chain management cycle. Procuring and purchasing too play a key role in the SCM functions as it affects in deciding on the business scope and boundaries in relation to the other suppliers and keeping the overall cost low. Production stage in the SCM of an organization plays a major hand as it decides the leading time to the finished product that can be distributed according to the consumer demand and with in the permissible time, so as to prevent non-production hours and over stocking of the inventory. Post distribution, an organization looks to get the products sold as per prior predictions and this is the most important stage to keep the operation cycle moving. If the finished goods do not get sold the entire SCM chain gets affected, resulting in the reduced efficiency and the profit margins for an organization. Supply Chain Management, as is now clear that it’s integration of various departments and stages of operations in an organization and the role of supply chain managers is to cut down costs at various stages, improve the process efficiency by closely monitoring, in-time delivery of goods and services, and overall build a healthy and cost-effective relationship with supplier partners and distributors. SCM Strategies There are several supply chain strategies, like the Push inventory control, pull inventory control, and the advanced hybrid strategies. Supply chain strategies have evolved over the years from traditional ones that were implemented years ago to some of the advanced hybrid strategies. These can be understood through some illustrated examples- Push inventory control - Materials Requirement Planning (MRP) Pull Inventory control - Just In Time (JIT) Advanced Hybrid control - electronic data interchange (EDI) In today’s advance internet era, most of the organizations adopt several strategies in some kind of mix of various inventory management techniques to get the best results suited to their specific needs. The internet has helped most of the organizations to optimally integrate supply chain strategies into their operations as it enables them with vast amount of information regarding market fluctuations, seasonal changes in demand, customer preferences, and the threat from competitions. All this information helps organization design their supply chain strategy. Traditionally, it has been observed that most important and crucial aspect of the supply chain management has been the communication process adapted by an organization, whether with in the organization or with the supplier and distributor partners. Advancing Information technology has come as a boom to the supply chain management process. The effectiveness and efficiency of any supply chain management process is the integrations and coordination of several departments in an organization with the various other parties involved, like the vendor partners and the widespread branches of the organization. Accurate information flow and exchange was never as easy as it does today with managers not have to go around visiting and touring all over but have the information real time from offices situated miles away or even overseas. Several of the advantages of information technology to the supply chain are, accuracy of information exchanged, time saved in transmitting the information and thus the decision making becomes quick and accurate. In addition, huge amount of travel costs have cut down with the presence of features, like the data exchange portals of CISCO, where all employees of an organization can upload data that is then accessible to every member of the organization. This also ensures employee empowerment as they can share their opinions with the management and every one concerned without felling let out or ignored in case of conflicts. They can also provide their first hand inputs as many a times it so happens that the staff that is actually involved in the transaction process knows the intricacies that even management is unaware of; thus helping create a perfect integration and coordination to achieve the objectives of supply chain management. Conclusion Supply Chain Management is the coordination and integration of various activities and aspects of an organization’s operation process to keep the costs low, improve the process efficiency by reducing the production lead time, meet the demand and supply, maintain optimum stock inventory, and provide high value for customer satisfaction. In short, keeping the overall running costs of an organization low and increasing the profit margins for sustained competitive edge. The supply chain has been in existence from long and has evolved over the years with the roles and functions getting complex with ever increasing competition. Information technology has come as a boom for streamlining the supply chain management with numerous features that aid the coordination of various departments and better and accurate decision making. Works Cited Ballou, Richard. Business Logistics/Supply Chain Management. 5th Edition. Upper Saddle River, NJ: Pearson Prentice Hall, 2004. Hugos, Michael H. Essentials of Supply Management. John Wiley and Sons, 2011. Web. Mentzer, John T. Supply Chain Management. Sage, 2001. Web. Mangan, John, Lalwani, Chandra, and Butcher, Tim. Global Logistics and Supply Chain Management. John Wiley and Sons, 2011. Web. Read More