Managerial Decision in Supply Chain - Essay Example

Managerial Decision in Supply Chain Table of Contents Table of Contents 2 Introduction 3 Inventory Decisions5 Risk Management Decisions 6 Demand Focus Decisions 7 Investment in Better Demand Information 8 Supply Chain Flexibility Decision 8 Networking Decisions 9 Change of Prices 9 Conclusion 10 Bibliography 11 Introduction Supply chain management is critical to the movement of services and goods from suppliers to the final consumers. Supply chain entails all activities, functions, and facilities involved in production and delivery of goods and services from suppliers to their customers. It is therefore important to therefore important to optimise each component in the supply chain and interlinks synergistically. Supply chain is a key feature to success or a failure of today’s business. This is because getting the correct products to consumers is not only the key player to competitive success, but also the solution to survival. According to Industrial Marketing Management Journal, managerial decisions to prevent failure in the movement of goods and services are very crucial (Handfield, & Bechtel, 2002:367). The decisions should target to respond to the market requirements with overall efficiency. This issue falls on the management. The management should design sound strategies to respond swiftly to the consumer’s demands. Moreover, the strategies should take care of the ever-changing markets. This is the only way to maintain and bring a competitive advantage to the market. For supply chain to remain efficient, it should concentrate on reduction of cost. In addition, the supply chain should avoid wastage of resources of non-value added activities. The managerial decisions should focus to resolve trade-off between responsive and efficiency (Handfield, & Bechtel, 2002:369). This paper examines the managerial decisions that increase responsiveness of the supply chains. Responsiveness is the ability to take appropriate actions within apt time-scale to customer demands or market changes. There are five principal supply chain drivers. These comprise of production, inventory, location, transportation, and information. The right combination of responsiveness and efficiency of these drivers is crucial for the increase of supply chain and reduce inventory and operating cost. To achieve this, it calls for the management to make sound decisions to respond well to the customer demands or changes in market. This is because each customer has specific set of needs. Some markets require high level of receptiveness and others concentrate on effectiveness. The general effect of making prudent decisions regarding to each driver establishes the affectivity with which the supply chain serves its market for maximum profits for the participants in the supply chain (Minnich, & Maier, 2008:3). The common tenet from literatures holds that for success of supply chain managers should be aware of changes in the competitive market environment. The managers should then re-organise the supply chain to satisfy the genuine needs of the consumers. This swift response determines the adaptation of firms and supply chain to the needs of the ever-changing markets to achieve lasting competitive success. This means that policy designing, and changes are crucial to respond well to the supply chain in the five areas of the company. These are production, transportation, information, inventory, and location. The managers’ decisions on the strategies they should focus on the situation at hand. The decision should endeavour to achieve the lower costs of goods and services. This is an issue, which many supply managers grapple with. It therefore means that the managers should choose between two strategies philosophies. The management can either demonstrate a high reaction to consumers at any cost. The other way is to reduce waste in order to achieve maximum profits (Minnich & Maier, 2008:3). The managerial decisions should concentrate on devising sound processes and key performance pointers that rewards cross-functional and consumer-driven metrics. Second, the decisions should embrace concerted processes of all the stages of the supply chain. This should happen within the company and with partners and customers. The third decision entails implementation of information system that helps in decision-making processes. The fourth managerial decision should encompass strategic sourcing to establish capacity, flexibility, and expectations with the supply base. The last managerial decision should focus on transport. The mode of transport plays a key role to the supply management (Minnich, & Maier, 2008:4). Inventory Decisions A company can deal with quantity of products of consumers’ demands in three ways. These ways include inventory, time, and capacity. The available literature argues that raising the levels of inventory of finished goods or components gives extra flexibility for response to changes of the needs of customers. Conversely, inventory level reduces the effectiveness of the supply chain since they are expensive. This is both in storage and capital cost. This therefore implies that increases of inventory levels are not prudent ways to increase responsiveness. The high level of inventory signifies sub-optimality in the supply chain. This then calls for other strategies that may comprise of variability in reductions. This strategy may yield well than the inventory increases (Lewin, & Sourcetrix Corporation, 2009:12). To increase the responsiveness of the supply chain, information flow is very crucial. Policies and information should come from the market point to supply chain members so that they may circumvent inventory and production capacity against uncertain demand. This may be a difficulty task to achieve. This is increased responsiveness to supply chain can incur expenses that reduces the effectiveness of the chain of supply. This is an implication that efficiency and responsiveness are two discrete strategies that have different links to a variety of products. The management should enact the right policies to increase both responsiveness and efficiency simultaneously. To start with, the management policies should not only focus on the cross-functional integration but also should look at the coordinating issues not only within the company but also across companies. This improves supply. Managers should focus on aligning organizations goals to enable companies deal with overwhelming supply chain. This is in spite of connectivity and new application software such as supply-chain-optimization software. Cross-company coordination has to take many forms in order to benefit the company fully. Managers should embrace just-in-time programs to deal with challenges that come with heavy supply demands. The managerial decisions should look at lowering the supply related costs and improve responsiveness. The management should devise a strategic when it is looking at the products and services for their consumers. Management has a crucial role to play when product cycles mature and sales of the products goes down. The supply chain management should make sure that replenishing happens within the shortest time possible. The management should devise new versions of the products that are already in the market. In addition, the decisions of the management should rationalise the existing products and decide on whether to bring a new service or product in the market (Lewin, & Sourcetrix Corporation, 2009:13). Risk Management Decisions The prosperity of company depends on realisation that it has to deal with the risks of competitions in the market place. The decisions of the management should concentrate on the addressing the trade-offs that have a link with integration. The decision makers should focus on not only to physical efficiency but also to also not market mediation. The company to prosper it should manage and maintain two aspects of supply. These are physical supply and mediation process. Physical supply entails the production and distribution of goods from suppliers, manufacturers, distributors, and retailers to the consumers. The manufacturing cost comprises of cycle stock cost and transport. Market mediation involves relating quantity and variety of good supplied through a supply chain to the ones the customers demand. Some of these costs include safety capacity, price protection, returns, lost sales, and safety stocks. Most companies face market mediation and physical costs because of increasing demand from customers. Innovative ideas of the management can help to reduce the market mediation and physical costs. The supply chain management should focus on decreasing the market-mediation cost in readiness to respond to swiftly to unpredictable market demand. The decisions should set up buffer inventories and capacities in order to attain responsiveness. The company should put a lot of its investment in the lead-time reductions. The design of products should allow for the postponement of their differentiation. This helps to improve, manage, and understand demand (Minnich, & Maier, 2008:13). Demand Focus Decisions The managerial decisions should not only focus on the supply but also on the demand. The company should seek to look at its earlier information on demand to match the current supply and demand. This is a strategy to renew the efforts of the demand management. Many companies grapple with better quantification of the impacts of ill understanding of the of supply chain performance. This is because of poor managed information on demand. The past information on demand helps the marketing to align its efforts with the supply chain. This is a very prudent way to enhance good relationship between customers and the supply chain management for maximum increase in sales and profits. To achieve this strategy, the management should invest a lot in better information on demand and demand-based management. The managerial decisions should address the variability of demand increases at each point of the supply chain. This is because this variability increases both market-mediation costs and physical distribution costs. To reduce toe variability, the managerial decisions should embrace sharing of forecast and demand information, streamlining replenishment with programs such as vendor-managed, and changing the schemes of allocation in cases of inadequacy in product supply (Lewin, & Sourcetrix Corporation, 2009:11). Investment in Better Demand Information The managerial decisions should capture the consumer demand shifts. This is important information that drives the decisions of the supply chain. The investment in information on the point of sale data is not adequate. The management should combine the investment information with a reactive supply chain. The supply chain should respond swiftly to current information on demand through adjusting the supply. This helps the company in matching supply with the changing customer preferences closely. There is success in investing in demand and a reactive supply chain (Kopczak, & Johnson, 2003:9). Supply Chain Flexibility Decision Managerial decisions on the flexibility of chain of supply influences the capability to make good of the supply chain cycle time. The increases in flexibility calls for a reduction in fixed costs and times. The fixed costs comprises of minimum quantity purchases, distribution and manufacturing facilities, dedicated capital equipment, and machine set-ups. It is therefore important for the management in the supply chain to make prudent decisions on the assortment of services and products delivered through a set of given resources. Other decisions entail the mobility of switching among choices in the assortment, and the steadiness of performance for various operations will determine the effect of fixed costs on the supply chain flexibility. The supply chain management through strategic opportunity and cost analysis should rationalise market mix and product with combinations of equipment and facilities. These decisions will help in determination of the flexibility of supply chain thereby producing opportunities for raising return on assets and easing working capital (Lewin, & Sourcetrix Corporation, 2009:4). Networking Decisions The management should make decisions to share information on planning among the company’s stakeholders. This helps to devise strategies to eliminate constraints in the supply chains. This enables the management to notice challenge before they set in the company. Therefore, the management is able to counteract the challenges through prior planning. Prudent policies on inventory help to attain supply chain flexibility. The policies curb the procurement from ordering many of the wrong material. The sound decisions in the area of flexibility enable good inventory decision to acquire cheaper and minimum batch sizes in a company (Kopczak, & Johnson, 2003:4). Change of Prices This demand management model has its basis on the price. It is a strategy to react to imbalances in demand and supply through changing product prices. This steers demand to the product in the stock that have low sales. The result of these decisions is am increase in sales through an upsurge in demand. Therefore, the company avoids the costs of the mismatches in the supply demand thereby streamlining the supply chain. Price fine turning of competing varieties of goods drives the customers towards the gainful mix of purchases (Kopczak, & Johnson, 2003:5). Conclusion It is evident that sound decisions are central in responsiveness to the supply chain. To streamline the swiftness in which a company can achieve responsiveness, it requires the efforts of all the stakeholders in the supply chain. The supply chain management should incorporate the varied views of the decision makers to come up with a viable solution to deal with overwhelming activities in the supply chain. This will help in the smooth movement of goods and services from the point of production to the final consumer. Bibliography Beamon, B., 1999. Measuring supply chain performance. International Journal of Operations & Production Management.19 Iss 3. Available from: http://www.emeraldinsight.com/journals.htm?articleid=849174&show=abstract [Accessed 4 May 2012]. Handfield, R., & Bechtel, C., 2002. The role of trust and relationship structure in improving supply chain responsiveness. Industrial Marketing Management, 31 Issue 4. Available from: http://www.sciencedirect.com/science/article/pii/S0019850101001699 [Accessed 4 May 2012]. Kopczak, L., & Johnson, A., 2003. Supply-Chain Management Effect. Available from: http://www.farrell-associates.com.au/Ops%20Mgmt/Supply%20Chain%20Mgmt.pdf [Accessed 4 May 2012]. Lewin, S., & Sourcetrix Corporation, 2009. Supply Chain Decision-making. Available from: http://www.sourcetrix.com/docs/Whitepaper-SC_decision_making.pdf [Accessed 4 May 2012]. Minnich, D., & Maier, F., 2008. Supply Chain Responsiveness and Efficiency-Complementing or Contradicting Each Other? Available from: http://www.systemdynamics.org/conferences/2006/proceed/papers/MINNI308.pdf [Accessed 4 May 2012]. Reichhart, A., & Holweg, M., 2007. Creating the Customer-responsive Supply Chain: A Reconciliation of Concepts. Available from: http://www-innovation.jbs.cam.ac.uk/publications/downloads/reichhart_creating.pdf [Accessed 4 May 2012]. Read More