Supply and Production - Essay Example

Advantages of supply chain management over traditional competitive processes The supply chain management makes the delivery of product to the customers when, where and how they want it and in the quantity they want at minimal cost. First of all, the supply chain management is the practice that provides the guidelines on collaboration of many parties and processes in the product life cycle. Second, the supply chain management covers the whole process of product development and delivery to the end user - starting with the introduction of the raw materials to the point when consumers buy the finished product.

In addition, the statistics shows that the companies that have implemented the supply chain management have a greater cost effective advantage over the competitors because they are able to accomplish short-term and long-term goals, gain greater market share and increase the customers' satisfaction. One of the most important advantages is that the implementation of the supply chain management makes it possible to reduce the inventory days of supply by half and introduce the order-cycle time more efficiently.

It means that the products are delivered much faster and the delays happen much rarely compared with the traditional competitive processes. Using supply chain management every party involved has an important role and the whole structure works as one unit - there is no division among departments. Finally, supply chain management is an effective cost reduction tool - there is not need to rent or build huge warehouses because the inventory is not getting piled up.Disadvantages of supply chain management over traditional competitive processesOne of the most obvious disadvantages of supply chain management is its unity and connectivity.

For example, if one chain of the system fails the whole process will fail as well. If one of the suppliers is unable to meet the delivery time, the next unit will not be able to move forwards. Therefore, the company has to ensure that every level operates but still have alternative supplier in case one of the levels does not work out. It is rather costly and can lead to the loss of the market share. Second, the supply chain management is the new system and many companies are not in the hurry to introduce it.

Some believe that the new system is not tested enough to be used, others wait until time will show whether or not it is really effective and can decrease the inventory costs. In addition, supply chain management is expensive to be introduced and requires high integration of all departments in the company. With supply chain management the company loses the control over suppliers and sometimes the suppliers get more decision making power than it would be expected. For example, the supplier can increase the price for their products and the company, being too dependent on suppliers and having limited time will have to agree on the new terms.

It is not beneficial either for the company (it loses potential profits) or for the customers (get more expensive goods). The eternal question about the amount of inventory is not solved by supply chain management according to which the inventory is reduced to minimal amount. Thus, the company is completely unprotected from extraordinary cases and will be back up the demand is one of the suppliers is unable to provide the necessary amount of inventory on time. If supply chain management is actually a superior way of managing procurement and production, how (if at all) does that modify any of the economic "big ideas" we examined in Module 1 Works CitedFerguson, Brad.

"Implementing supply chain management. Production and Inventory. Management Journal Alexandria Second Quarter 2000.