Why Is an Effective Supply Chain Management Important for the Success of Any Company - Term Paper Example

Supply Chain Management 1. Introduction Before going into the issue, let’s first get to know what supply chain management actually is. Supply chain management comprises of a set of actions which are taken by the management of a company in order to ensure whether the process of supply chain is running effectively or not. Blanchard (2007) found efficiency and competence as the key factors of a successful supply chain management process. The main activity included in the process of supply chain is the conversion of raw materials and components into a final product. Supply chain management system is also involved in interacting with suppliers and customers, determining price of the product, and ensuring quality of the product. Supply chain management is deeply involved in the successful achievement of desired levels of productivity and profitability by any company or organization. One of the key factors of supply chain management process is purchasing. Gadde and Hakansson (1993) found that purchasing is seen as one of the key strategic functions to be performed by the management of any organization in order to achieve market domination in a competitive market. 2. Selection of Suppliers and Price of the Product In my view, selection of suitable suppliers for a company is critically importance because suppliers are directly involved in the manufacturing process of any product as they supply the raw material to the company which plays its part while setting up the price for a product. Suppliers often charge different prices to the parts of the products that they supply to a company. A company should always select a supplier who should deliver the raw material and required parts of a product at an economical price to the company because it is very important for a company to set a competitive price for any product. And competitive prices can only be set up if cost of manufacturing of a product is less than then actual price of that product in the market. Ford (2002) found that the objective of selecting a suitable supplier in order to cut down the manufacturing cost of a product can be achieved by analyzing previous performances of various suppliers. Ayers (2001) found that the analysis regarding suppliers should be based on the suppliers’ credibility, quality of the raw material that the suppliers provide to the company, and the price at which they supply the raw material. After a complete analysis, the purchasing manager should select a trustworthy and most credible supplier. Price of a product is always set up by determining the actual manufacturing cost of the product. If a company wants to achieve market domination in a competitive market, it has to set up lower prices for its products as compared to other companies. It is because customers always get attracted towards comparatively cheaper prices instead of buying a high priced product of the same quality. Lowering the prices does not mean to set the price less than or equal to the manufacturing cost of a product; it rather means to cut down the manufacturing cost in order to set a competitive price for a product. In the process of finding out the ways to cut down the manufacturing cost, selecting a suitable supplier is one of the key issues. Not only selection, working with suppliers is also a very important issue. While selecting a supplier, five main factors should always be taken into consideration by the purchasing manager. These factors include communication level of the supplier, quality of the raw material, supplier’s certification, price of the raw material and lead time. In order to set a competitive price for a product, the quoted price of raw material should never be on wild speculations. It is because price of the raw material directly affects the actual price of the product. Higher the price of the raw material, higher will be the manufacturing cost which will return in high price product. So in order to set up competitive price for a product, purchasing manager needs to select and work with a credible and honest supplier because it will not only help the company in cutting down the manufacturing cost of the products but will also result in achieving market domination through setting up competitive prices for the products. 2. Quality of the Product Another very important factor which should be considered while selecting and working with suppliers is of adding quality to the products of a company. In my view, it is a company’s purchasing manager’s key responsibility to select such supplier who should be able to provide high quality raw material to the company. If we talk about such processes which are essential for the achievement of desired goals and objectives, we must say that purchasing process is one of those processes regarding supply chain management in any organization. Cohen and Roussel (2005) found that if a company wants to develop a high quality product, it needs to buy a high quality raw material in order to transform it into the final product of high quality. If the raw material will be of ordinary quality, a high quality product can never be manufactured by the company. Quality is always better than quality for any company. Sometimes the suppliers supply low quality material to the company in order to save some money. So an eye should always be kept on the supplier in order to know whether the supplier is providing the raw material of required quality to the company or he is cheating with the company by supplying low quality material. It is the responsibility of the purchasing manger to select a high reputed supplier for the company. A purchasing manager should know that quality is the key towards success. Kantner (2000) found that if a company can not provide its customers with quality products, it will never be able to achieve the desired profits. But if a company considers quality as the most valued aspect of a product, then it will be very productive and profitable for the company. Quality means to provide product satisfaction to the customers. Any organization or a company can satisfy the stakeholders and the customers if it provides them with quality in the products that they use. But quality products can never be produced by a company if the purchasing manager selects a wrong supplier just to save some money. Quality in a product leads the organization towards market domination through delivering high quality products and services to the public. The selection of supplier should be based on quality of raw material instead of low cost. Inspection of the raw material is very important in order to produce a high quality product. So if the company hires me as purchasing manger, I will check the samples of raw materials before selecting a supplier. As a purchasing manager, it will be my responsibility to give priority to high quality raw material while selecting a suitable supplier. 3. Customer retention If Primark hires me as purchase manager, I will give proper attention towards customer retention because in my view, gaining customers’ satisfaction is the key towards success. And the customers are only attracted towards a company if they are provided with their needs and requirements. The main success factors of customer retention are quality and just-in-time production. A company should focus on producing quality products for its customers because customers are the most valuable assets of any company and once they are lost, a company will not be able to achieve desired profits. I will make sure that my company provides quality products to the customers in order to gain customer satisfaction. Selecting suitable suppliers plays a key role in achieving this task because they are the suppliers who provide a company with high quality raw material which is very necessary for the high quality productions. As a purchasing manager, I will develop appropriate purchasing policies in order to run all supply chain management activities effectively. Just-in-time production also plays an integral role in attracting and retaining customers. It is because when the customers will be provided with their desired products when required, they will surely become satisfied with the company. In my view, a company should always give the customers what they expect from the company. Low quality products never help the company in retaining the customers because customers always want to buy a high quality product and if a company manages to provide the customers with quality products, it will never loose its potential customers. It is also important to note that customers do not regard late deliveries of products, they want right product available to them at right time. If a company doesn’t give importance to just-in-time production and fastest product delivery mechanisms, it will not be able to retain its potential customers for a longer time. 4. Conclusion Summing it up, it can be said that effective supply chain management system is very important for the success of any company or organization because it is deeply involved in various critical success factors which include determining price of the product, ensuring high quality product development and retention of potential customers of a company and it is the responsibility of the purchasing manager to successfully carry out several important tasks and activities related to the supply chain management system. References Ayers, J., 2001. Handbook of Supply Chain Management. Florida: CRC Press. Blanchard, D., 2007. Supply Chain Management: Best Practices. New Jersey: John Wiley & Sons, Inc. Cohen, S. & Roussel, J., 2005. Strategic supply chain management: the five disciplines for top performance. U.S.A: McGraw-Hill, Inc. Ford, D., 2002. Understanding business marketing and purchasing: an interaction approach. 3rd ed. UK: Thomson Learning. Gadde, L. & Hakansson, H., 1993. Professional Purchasing. London: Routeledge. Kantner, R. (2000). The ISO 9000 answer book (2nd ed.). Canada: John Wiley & Sons. Read More