This report discusses Supply Chain Management paying particular interest in the role it can play in increasing the strategic position of a firm. Different facets of supply management are also examined and their roles in business productivity are established. The conclusion is that Supply Chain management is very important and should be adopted by any business that wants to maintain profitability even during hard financial times.
This report aims to find the relationship between Supply chain Management and business success. This will assist in finding out the ways to sustain business profits even with the current global financial problem.
This looks at the current economic situation and the changes that have taken place in businesses due to this. It also covers Supply Chain Management in detail and its effects on a business enterprise.
Background to the Study
For a very long time business enterprises have been trying to come up with ways of improving business efficiency and thus increase profits. The recent global economic problems and competition increases have made it obligatory for companies to come up with ways that will ensure continuity of the companies even in the face of financial problems. Supply Chain Management is one way that companies attempt to improve their strategic position. (Cox 1999)
Data Collection Method
The main type of data used in this report was secondary data. Information was retrieved from books and journals. All the sources of data were peer-reviewed and are therefore very reliable to give objective and accurate information
Definition of Supply Chain Management
An understanding of supply chain management must have the foundation of comprehensive insight into the concept of the supply chain. A supply chain is a network of companies that bring products and services to the market. The chain does not comprise of the manufactures and final suppliers only. It constitutes the wholesalers, retailers, transporters, other intermediaries, and even the customers. (Lambert 2008)
With this in mind, we can say that supply chain management is the activities done to manipulate the supply chain so that it can be efficient. The different players in the supply chain have to work together to satisfy the customer (Hugos). In today’s business environment, the supply chain has to be managed strategically, considering the competitors and other external forces. Supply chain management covers all the activities to do with the sourcing of the raw materials, procurement procedures, the conversion process, and relevant logistics. (Cox 2008)
The center of any business venture is the customer. Therefore when coming up with a good supply chain, the manager should consider the customers’ values and wants. The customers have to be grouped according to their preferences to align the supply chain with their specific wants. (Copacino 1997)
According to Mentzer (2001) adopting supply chain management gives a company a very competitive position in the industry. Having an effective supply management plan can give a business enterprise an edge over its competitors.
Components of Supply Chain Management
The logistics that are part and parcel of a supply chain should be managed effectively. The parts in the distribution channel such as transportation, distribution services, and inventory should be considered. (Copacino 1997)
Customer management is a very important part of supply chain management and it deals with customer service and supplying customers with relevant information. So the suppliers have to be by the customers’ buying practices (Copacino). Customer relationship management deals with the relationship between the company and the customers. It ensures that customers are given informed about the availability of the products and expected delivery dates. A good customer service initiative will establish good rapport between the customers and the company to create positive feelings about the company in the customers. Most companies have more than one supply chain according to the demands of the customer (Neely 2008).
A good system of control should be established to measure progress and find the variation with the planned activity level. The performance measures should be focused on the customer. The focus on the customer should be the drive of the conduct of all members of a distribution channel. (Copacino 1997)
Managing the demand of a company’s products involves looking at the capacity of the supply chain and relating it to the needs of the customer. Disruptions in the availability of a product have to be eliminated and this can only be done by putting the right procedures in place. The supply should be matched with the demand in the market. The company can influence the demand for its products through promotions or attractive pricing. This means that demand management is not just about forecasting but also includes linking the demand and supply, escalating flexibility while reducing unpredictability. (Neely)
Manufacturing flow management
SCM also takes into consideration the flow of products in the company’s manufacturing plants. It focuses on moving the raw materials through the different stages up to the final product. It also takes into consideration flexibility, timeliness of manufacturing, and at the lowest cost. (Neely 2008) The operations should be in line with the sales forecasts. Therefore information such as expected demand and forecast information will be shared in the whole company and even in the supply chain (Copacino 1997). The operations of a company should be flexible and effective. This will enable the company to reduce inventory while still being able to provide good products and services. They can use demand signals like the point of sale data to know whether or not to start producing. This information is also reflective of the activities in the market in terms of sales volume. (Copacino 1997)
Supplier Relationship Management
The relationship between the suppliers and the company is very important. The company should form strong bonds with the suppliers to have a more effective supply chain (Neely 2008). Other companies in the supply chain are just as important and it is vital to have good relationships with them. It is not possible to manage the supply chain single-handedly so having strategic partners in the supply chain is essential. (Copacino 1997)
Inventory management is also a very important part of the SCM. It is beneficial because it will reduce inventory costs. Inventory should be ordered when it is needed and large amounts of inventory should not be left to stay in the storehouse. It is advisable to manufacture products only when there is expected demand. (Copacino 1997)
The Procurement process
The procurement process should be developed to ensure that there is a continuous flow of the new products. The procurement manager and the production manager should work together to ensure that there is a constant supply of raw materials in stock to be used in the production process. (Lambert 2008)
Product development and commercialization
Product development and commercialization is the part of the SCM that presents the structure of developing products and making them available in the market. The people dealing with product development have to coordinate with those who a charge of identifying the customers’ requirements. This is to ensure that the end product will satisfy the customers’ needs. (Neely 2008)
This deals with things like returns, gatekeeping, reverse logistics, and returns avoidance (Neely 2008). These issues are dealt with within the organization and with specific members of the supply chain where there is a need. Management should strive to ensure that there are minimal unwanted returns and to manage reusable assets such as containers. The managers coordinate with suppliers to use specific sizing guidelines. This will reduce the returns and the costs associated with returns. Consumer satisfaction will also be increased, thus there will be increased competitive advantage. (Jespersen Skjott-Larsen 2005)
The current economic environment
The current economic environment is very hostile to business enterprises. Investor confidence is at an all-time low and there is a decrease in the demand for products. Consumers are also facing financial problems so they have cut down on buying products especially luxury items. This environment is of much concern to the managers, directors, and stakeholders of companies. This is because business has been affected and it is very difficult to engage in operations because the cost of production is very high. What the companies need is a way to cut costs and increase sales to maintain profitability. (Jespersen Skjott-Larsen 2005)
Problems in Supply Management
According to Harrison (2001), various issues can cause problems in the supply chain. Distrust and lack of cooperation from the suppliers can be a hindrance to an effective supply chain. Bad management of supplies will also be detrimental. If causes of waste in the production process should be known and dealt with there will be negative consequences for the company. Wastage during manufacture should be stopped and excess staff released.
This report has established that SCB can play a significant part in providing a sustainable competitive advantage. If the companies follow the principles of SCM, they will be able to reduce costs, increase customer satisfaction and increase profits. Even in difficult economic times, the companies can remain competitive and profitable.
If the customers are given high-quality goods and impeccable customer service, they will be loyal to the company and continue buying the products. A good relationship with the suppliers will be beneficial because by creating partnerships [s with them, the supply chain will be more effective. Performance measures will be helpful because they will help to keep the companies on track. Good inventory management will reduce the costs of inventory. Returns management that is effective will ensure that no products are returned thus saving the firm those costs. The impact of the above is expected to put the company in a better competitive position.
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