How to Create a Cost Effective Supply Chain - Case Study Example

How to Create a Cost Effective Supply Chain By + Contents Contents 2 0. Introduction 2 2.0. Main Text 4 2.1. How to Develop a Cost Effective Supply Chain 4 2.2. Putting the Complexity Involved into Perspective 4 2.3. Managing the Risk Involved 5 2.4. Early Involvement in All the Activities 5 2.5. Proper Planning 6 2.5. Putting Geographical Conditions into Perspective 6 3.0. Case study 7 4.0. Conclusion 8 1.0. Introduction A supply chain is the setup among different companies that engage in the production, handling and sale of a specific product. It entails the steps taken to move a commodity from the point of manufacture to the user. The management of this supply chain involves all the activities that include planning, organising and implementation (Wynne-Powell, 2004). This includes how information, raw materials and other resources are combined to create a product, and the way that the finished commodity is the moved to the final consumer. When moving the product from the point of production to the final consumer, there are many players involved. They include the distributors, suppliers, wholesalers, and finally the retailers who deliver the final product to the consumer (Rodgers, 2013, p. 30). A cost effective supply chain is very important for any organisation. It facilitates the quick flow of finished goods from the point of production to the final user, and information from the consumer to producer (Cassivi, 2006, p. 20). Information from the consumer would include the level of demand, complaints or compliments about the product. A supply chain that has been properly set up will ensure that commodities of the best standard are able to flow from the factory to where the demand exists (Wynne-Powell, 2004). A diagram of a supply chain The flow of finished commodities from the producer to the final consumer The flow of feedback from the point of consumption to the manufacturer 2.0. Main Text 2.1. How to Develop a Cost Effective Supply Chain A supply chain is an essential component of any business system; managers are always looking for new and better ways to improve the supply chain within their organisations. An effective supply chain will ensure that commodities are reaching the prospective consumer in the best condition and at the lowest cost. Many organisations have different modes that they follow to establish a proper supply chain. However, what is necessary to put in is an effort to establish a cost effective supply chain (Dooley, 2009, p.16). 2.2. Putting the Complexity Involved into Perspective When an organisation is rolling out a major project, failure to meet deadlines, inaccurate collection and implementation of data and failure by key stakeholders to deliver the material required at the right time will complicate the project. The origin of the complication is the large number of people and activities involved in the project. The need to properly organise and manage all these components further adds to the complexity (Flynn, 2010, p. 7). The distances that are involved when moving a commodity from the producer to the consumer are very important. To set up an efficient supply chain, the management need to understand all the difficulty that will be involved. Then the management during their planning will factor in all these difficulties. This will ease the burden during the implementation stage (Hitt, 2011, p. 56) 2.3. Managing the Risk Involved There are numerous risks encountered in supply chain management. The product to be supplied may have defects. There are numerous suppliers involved; a supplier may be affected by a variety of problems (Rodgers, 2013, p. 43). Natural disasters may cause the supplier to fail in delivery of goods; the supplier may also run into financial difficulties. There is a likelihood of the incorrect information flowing up the supply chain to the producer. When developing a cost effective way to manage the supply, the management should develop possible mechanisms to counter these kinds of risks when they take place. When the risks involved are contained, the firm will ensure a constant flow of the right quality of commodity from the plant into the market (Gomm, 2010, p. 32). 2.4. Early Involvement in All the Activities The firm should carry out the activities early enough to avoid any inconveniences that result from doing things when confronted with deadlines. The suppliers should be identified early enough in the project; the capacity of every supplier in terms of resources and workforce should be known. The product should also be made early enough; this will enable the supplier to check quality in line with customer requirements, and it then gives the management time to correct any defects before supply begins. This also enables proper action to be taken in case a natural calamity is to strike (Cassivi, 2006). 2.5. Proper Planning The management should come up with an appropriate plan on how the supply chain will be developed and managed. Once all the complexities that will be involved are determined, the management are able to plan their activities well. The plan should detail criteria for the identification of suppliers and the requirements these suppliers need to meet. This is in relation to their financial capabilities and the ability to cover risk. A proper plan will also detail the amount of resources that will be required to roll out the supply strategy (Sunil & Meinde, 2002, p. 56). 2.5. Putting Geographical Conditions into Perspective The product will be supplied to numerous consumers in a variety of geographical locations (Rodgers, 2013). All this needs to be evaluated since in each area there will be different unique challenges that will be encountered. This issue is further complicated for international organisations which have to supply their commodities to various destinations around the world. They have to deal with numerous suppliers in a variety of locations; each of these suppliers experiences its own unique challenges. The management have to consider all these factors when designing a cost effective supply chain (Clapper & Hamblin, 2009). 2.6. Summary of the Process For an organisation willing to come up with an effective supply chain system, it needs to put all the above issues into perspective. Identifying the complexities that are to be encountered will enable planning to take place with this in mind. Identifying all the suppliers that will handle the commodity and evaluating their capabilities will provide adequate time for the manufacturer to concentrate on production and give a quality output. The geography of each region where the products will be supplied is also necessary, as the management will be able to tackle every region according to its unique characteristics. If all these issues are properly addressed in time, the management will be able to concentrate on the production of a quality product that meets the customer’s requirements (Carter, 2011, p. 67). The suppliers will also be able to deliver to consumers as much commodity as possible. This will result in greater sale, and thus the supply chain will be cost effective. Very little input in terms of finance will be used, while the output obtained from the system will be maximum (Sherer, 2005, p. 54). 3.0. Case study Proctor & Gamble is an international manufacturer of laundry and sanitary products for home use. It has presence all over the world. This means that the organisation supplies a significant variety of commodities to a large number of clients across the world. To be able to meet the needs of all these clients, a well-organised and established consumer distribution network is required to be in place (Finch, 2004). This supply chain will involve numerous suppliers in varied geographical locations. This makes the operation very complex. Recruiting suppliers all over the world is expensive; it is resource and time intensive. This is because all the suppliers have to contend with different geographical topologies as well as the diversity of clients. The flow of information is also complicated. There are numerous clients, and each has their own unique requirements. This means that the management have to develop different commodities for all the clients (Desbarats, 2009). Moving products around the world also requires suppliers with a substantial financial capability. These suppliers have to handle logistics in all areas of the world. This makes the establishment of a supply chain for this organisation extremely complex. It would require advanced planning and significant capital input. Proctor & Gamble has, however, managed to handle the situation easily as it is able to meet all its clients’ demands worldwide and always deliver the commodities on time (Sherer, 2005, p. 62). 4.0. Conclusion For an organisation to function efficiently it has to establish an effective supply chain. This supply chain enables the commodity to reach its intended consumers and the management to obtain the requisite information to improve on the product quality. For cost effectiveness to be obtained it requires advanced levels of planning and implementation. The management should be able to plan their activities in a way that the product always reaches its intended consumers at the right time and in the right state. There are many players involved along the supply chain; these include the wholesalers, distributors and the suppliers. All these people handle the commodity and are responsible for giving the management valuable feedback on the commodity. The distributors interact with the consumers and get first hand perspective of the consumers’ expectations. When an organization plans adequately and is able to establish an effective supply chain system. It will after sometime archive cost effectiveness, as it will be able to concentrate on production. This will leave the suppliers to handle all other details resulting in increased production and profitability. Thus, cost effectiveness is achieved (Sherer, 2005). Bibliography Clapper, L., & Hamblin, N. 2009. A reccomended management performance score card. Supply Chain Management, 12(2), 1-122. Cassivi, L. 2006. Collaboration Planning In A Supply Chain. Supply Chain Management: An International Journal, 11(3), 249-258. Carter, C. R. 2011. A Call For Theory: The Maturation Of The Supply Chain Management Discipline. Journal of Supply Chain Management , 47(2), 3-7. Dooley, K. J. 2009. The Empiricism-Modeling Dichotomy In Operations And Supply Chain Management. Journal of Supply Chain Management , 45(1), 38-43. Desbarats, G. 2009. The innovation supply chain. Supply Chain Management: An International Journal, 4(1), 7-10. Flynn, B. 2010. Introduction To Theon Global Supply Chain Management. Journal of Supply Chain Management , 46(2), 3-4. Finch, P. 2004. Supply Chain Risk Management. Supply Chain Management: An International Journal, 9(2), 183-196.. Gomm, M. L. 2010. Supply chain finance: applying finance theory to supply chain management to enhance finance in supply chains. International Journal of Logistics Research and Applications, 13(2), 133-142. Hitt, M. A. 2011. Relevance Of Strategic Management Theory And Research For Supply Chain Management. Journal of Supply Chain Management , 47(1), 9-13. Kumar, S. 2013. Resources and Supply Chain Management. Journal of Supply Chain Management , 49(3), 111-111. Rodgers, D. 2013. Resources and Supply Chain Management. Journal of Supply Chain Management , 49(3), 111-111. Read More