Supply Chain Management: Key Factors

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Introduction

The contemporary business environment has become so competitive that business enterprises have been forced to device new strategies in a bid to ensure their success in the market. One of the commonly adopted strategies is control of processes of distribution of commodities and procurements. In this view, supply chain management comes in handy. Basically, the supply chain coordinates supplies, as well as dictates and controls the way the products are delivered in and out of the organization. Moreover, the supply chain ensures that the goods are delivered at the right time, place and cost (Rockford consulting Group, 2009).

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As the businesses change, they should ensure that the supply chain management is effective to ensure that there is continuous and uninterrupted flow of information and products. The supply chain management therefore tends to ensure that the chain is effective. This therefore calls for the understanding of various factors that affect the effectiveness of the supply chain especially when it concerns the supply of parts and components to the firms, especially those whose installations have a long life span (Hugos, 2006, p.4).

This paper seeks to examine the nature of the supply chain, factors affecting the supply and how the supply chain may be modified to ensure that it is more effective and sustainable.

Supply chain management

A supply chain is the flow chart of how goods and services are moved from one place to another. This process starts with the sourcing of the raw materials and continues through manufacturing and distribution until the goods reach the end users or the customers. It also involves the ways in which the complimentary goods, together with the processes involved in their movement, are managed until they reach their final destination (Lambert, 2008, p. 2). These complimentary goods are what enhance or increase the value or the operations of the original or key products e.g. the spare parts (Borade and Bansod, 2007 p109).

The activities associated with the supply chain need to be well managed so that the whole process can run smoothly. In addition, the management of the operations involved in the supply process aims at synchronizing various components involved in this process in order to ensure that the customers are satisfied and that the supplies are made on time while keeping the costs down. It therefore calls for the management of the options available so as to guarantee that commodities are delivered at the right place within the given timeframe. This should also encompass charging the correct prices for the commodities and ensuring that the quality of the products is as the producer intended (Rockford consulting Group. 2009).

The main aim of the supply chain management is to ensure timely delivery of goods and services from the producer through the distribution chain to the consumers while keeping inventory at the minimum. Basically, inventory refers to the stock of the products that are stored at a given point of supply.

The knowledge of what the customers need is what drives the supply chain mainly because consumer demand is the key reason for there to be supply in the first place. This calls for a better understanding and better relationship among the parties involved in the manufacture, distribution and consumption of the products (Lambert, 2008, p. 2).

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Divisions of supply chain management

Supply chain involves different activities which include ordering the goods, paying for them and transporting them to the required destinations. Additionally, the flow of information involves the circuits used by the stakeholders in the supply chain to transfer or transmit data on the requirements of the consumer on the producer. In this case, information flow communicates the consumers’ orders to the producers and distributors in terms of the quality and quantities, together with the timeframe and the destination. Moreover, the updates on the supply are also communicated in this manner (Study Reveals Companies Lack Supply Chain Sustainability, 2009).

The flow of the products incorporates the movement of the products or goods from the points of manufacture through the distribution chains to the consumer end. The consumer may need complimentary goods to use, together with the goods supplied, or may be dissatisfied with the delivery and return it to the producer or the distributor who then sends it back to the producer for modifications. This is all under the product flow in the chain of distribution (Study Reveals Companies Lack Supply Chain Sustainability, 2009).

Finally, the financial flow is the movement of information on how and when the payments have to be made for the goods. This involves all the agreements among the manufacturers, distributors and consumers concerning the cost of the goods, how they will be paid for and for how long. This also involves the processes of the conversion of ownership of the goods until the consumers end up as the true owners (Rockford consulting Group, 2009).

For the supply chain to be successful there must be constant movement of data and/or information among all the stakeholders in the chain. Each party has to have the information about the needs of the others so that those needs can be fulfilled optimally. Basically, an organization may share information with the people up the supply chain, i.e. its suppliers. A manufacturing firm is an end user by itself hence it needs to buy supplies from other manufacturers or the owners of the raw materials. These supplies may include raw materials, machines and equipments to be used in the production process. Ideally, downward sharing of information involves communication with the firm’s customers so as to ensure that their needs are adequately met through the most efficient and economical means.

Original Equipment Manufacturers

These are companies that use products that are produced by other manufacturers in the production of other products that they sell using their own brand name; they therefore trade in other manufacturers’ products using their names. These second Manufacturers tend to customize the goods and products from the first manufacturers and thereafter sell these products as if they were the original producers (Anonymous, 2009). The term original equipment manufacturer may also be used to mean the original producers of a product, who produce with an aim of supplying to other manufacturers or companies with the products so that the latter can trade in them.

The supplier and the buyer should be producing goods and services that compliment each other so that when the buyer companies obtain the products, they can be able to repackage and re-brand them. This makes the final products superior and competitive in terms of quality and price, thus eliciting a big market command (Anonymous, 2009).

The suppliers of the original equipment may be varied in that the parts are supplied by different companies so that the consumers can be protected from exploitation. This also acts to ensure that there is continuity of production of the parts long after the original company that produced them folded. Moreover, continued production ensures that the manufacturers or consumers using the OEM products are continuously supplied (Anonymous, 2009).

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Mining

Mining is the process or procedure of excavating the ground for materials which possess minerals. Mining can either be surface or underground depending on how far into the ground the minerals are located. In addition, mining can as well be done from the water bodies commonly referred to fluid mining.

In the underground mining, there is application of specialized machineries and equipments that are expensive. These equipments and machineries include blasters, drillers, pumps, rail haulage, power transmitters, and even onsite mills that are used to reduce the amount of the extracts to be transported to the refineries as they sift through these materials to find and separate the useful materials from the rest.

The mining industry is much mechanized as the machineries are used both at the plant and in the mining sites. At the plants, the machines used are specific to the kind of mining that the company is involved in mainly because these plants are used to refine and extract the minerals from the whole materials collected from the mining sites. Indeed, the extraction methods may be very complex depending on the materials mined and these methods determine the kind of machines the plants are equipped with.

MIM holdings Ltd

This is the leading gold, coal, lead, copper and zinc producer in terms of extraction quantities in Queensland Australia and also has interests in other countries including Argentina and the United Kingdom. Throughout its mining activities, it employs a variety of machinery which is expensive to buy, and due to the kind of work the machines are involved in, it requires constant repairs so as to keep it operational (Anonymous, 2004).

Most of these machines have a very long operational life span which goes up to tens of years. However, due to lack of spares or sub assemblies required to put these machines in continuous production, there is always the problem of repair and maintenance. This mining company invested heavily into machinery on its inception, and some of the machines that were bought for large amounts of money are still operational but are limited by the maintenance and repair costs.

Factors affecting the supply of parts, components and sub assemblies

As the mining companies compete with each other in prospecting and extracting minerals, the equipments used play a very important role because they form the basis through which these processes are conducted. Properly working and technologically advanced machines give these companies an edge over their competitors, hence high returns on investment. However, due to the expensive nature of these machines, the mining companies prefer the machines with a long life span to those with a short span.

Technological advancement involves the changes in the levels of technology over time. As the markets and economies of the world develop and expand, technology tends changes in order to accommodate the changes in the consumer needs and expectations. These changes lead to modifications and sometimes whole change in technologies as the manufacturers change their products to meet the market needs (Monczka, et al, 2008, p.21).

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In the mining sector, changes in technologies may result from discovery of more efficient and cost effective mining methods. These changes may result in the stoppage of the production of the spares or sub assemblies for the older models of the mining equipments hence problems in their maintenance (Borade and Bansod, 2007, p.111).

The consumer demand of the product is another factor that may affect the supply of spare parts to the mining companies. Basically, the changes in demand of a particular product will consequently result in changes in production of the same product. For instance, decline in demand will drive the manufacturers to reduce supply up to a point where it stops completely.

The manufacturing companies are sustained in the markets by the competitiveness of their products in relation to other similar products in market. Failure of the company to compete favorably with other companies will result in reduced demand for its products, leading to reduced returns on investment. Many companies will react to this by closing down operations or diversifying to other products that are viable. The latter would lower and eventually stop the production of the spares for the older models that the company had produced (Borade and Bansod, 2007, p.113).

Companies, especially in the case of monopolies, risk the miners’ investments when they change products or when they close down either due to legal reasons or as a result of market forces. Since they solely produce the given products, their closure would result in gaps in the cycle of spare supply. Moreover, government regulations on the production of given machinery may lead to reduction or the stoppage of production all together as the production of these parts become more expensive to manufacturing companies or if they are outlawed by the government.

The economic environment prevailing in a given market may determine what is to be produced or not. In some cases, the economic factors like the availability of raw materials and the cost of production in relation to the other related products may drive certain products out of the market. If this happens to the manufacturers producing spares for these mining companies, break downs may be witnessed to the machines due to absence of spares to service them (Borade and Bansod, 2007, p.113).

Since the survival of the machinery depends on getting these parts and the continued production, the supply chains of the parts, sub assemblies and components are important and need to be well managed to ensure that the machines and plants are well maintained and repaired therefore ensuring optimum production. The company has an obligation to its customers, hence it has to maintain its clean sheet of the timely and perfect performance if it needs to maintain and increase its customer base. This shows that the machinery and the plants need to be well maintained and repaired so as to decrease the downtime.

When the spares and components are not supplied in time or when they are not supplied at all, the companies suffer losses as they will have machinery and plants that are defective but cannot be repaired due to the lack of the spare parts needed to make them operational once more. These downtimes tend to be very costly to the firms; however, they may be avoided if the parts, sub assemblies and the components supply chain are made more suitable for the continued operations of the machines and plants through continued supply of these parts.

Sustainability of the supply chain

For the supply chain to be successful for a given period of time into the future, other considerations apart from the financial aspect of the supply chain, should be factored. This is because the supply chains involve the interaction of people from different social backgrounds hence the knowledge of the dynamics of people interactions is essential (Supply chain management, 2009).

The future of the supply chains is also dependent on the environmental sustainability of the supply of these products. Basically, all manufactured products must rely on the natural resources for their production. These include the sources of the raw materials and all the other materials, water and air among others.

The supply chain has negative impacts on the environment, for instance, the goods in transit can harm the environment either directly through leakages or spillage or indirectly through the modes of transportation used to move these the goods; this may lead to increase levels of carbon in the atmosphere (HP Publishes New Guidelines for Supply Chain Sustainability, 2008). Organizations therefore should be conscious of the carbon footprints they leave in the environment and make sure to take responsibility for such pollution.

In the mining industry, environmental responsibility may be in form of land reclamation and the use of methods that promote the green environment. These methods may be applied throughout the procurement process i.e. from when manufacturers are sourcing for the raw materials until when the products are delivered to them (Supply chain management, 2009).

Collaboration is one method that the different organizations may use to ensure that there is sustainability in the supply chain in the mining sectors. This is where the various organizations or branches of the same organizations pull together their resources and cooperate in the supply chain so as to reduce wastages and therefore maximize on the limited resources while at the same time causing the least or no harm to the environment.

In the case of collaboration, these organizations may prefer to transport their goods together if their combined loads are less than the carrying capacities of the modes of transportation to be used to ferry the goods. Indeed, the single transportation would save an extra trip and if this is repeated, the carbon footprints will be reduced (Supply chain, 2008).

The purchase and use of equipments that are less environmentally degenerative would also ensure the sustenance of the chain as the process of mining would not be as degrading as it once was. This would act to ensure that even if the minerals are non-renewable, the environment would be able to regenerate itself in other ways (Lamb, 2008, p.348).

Outsourcing the parts and components together with the sub assemblies to another firm if the original equipment manufacturer is no longer in business or cannot produce the spares due to economic reasons may be the solution. This is where the mining companies with the long life spanned machinery and plants hire a firm specializing in the manufacture and renting of the specific parts to supply the spare parts. These firms will let the company to use the parts at a fee hence adequate and timely supply will be guaranteed. The organization may also outsource the whole of the machinery and depend on the outsourcing company for repairs and management (Wisner, et al, 2008, p. 328).

Information is another way in which organizations may ensure that they are performing at their optimum without working under the stress of breakdowns and unavailability of spare parts. This is because, with the right information the organizations are able to judge the market and therefore make sound present and future decisions which are important to the materials supply (Simchi-Levi, et al, 2004). In addition, increased information shows the status of the original manufacturers hence the company is able to predict the changes and be prepared to respond accordingly. This will help in the alignment of the processes of the business so that there is synchronization; indeed, this would help in ensuring that the organization and the supply chain are working at par (Blanchard, 2010, p.14).

The processes of supply chain may be automated so that there would be easier tracking of the progress of the supplies along the chain. These may include the ordering, buying and selling through the internet and proper planning. Moreover, this would ensure that the wastages in form of money and time are eliminated together with the reduction of inventory due to timely delivery (Simchi-Lev, et al, 2004).

Finally, analysis of the current performance of the chain may give the analysts ideas on how to improve them. This is through identifying the weaknesses and acting on them so that a seamless chain may be developed.

Conclusion

Supply chain management is therefore the key aspect of the managerial duties that are leading the business in the world today. The assurance that a commodity will be delivered to a certain destination at a given time and for a given price helps the end users and customers to reduce their costs of operation as they will cut on the storage costs. The management of the supply chain ensures that there is continuity in the supply chain through preservation of the environment and making sure that the chain serves the interests of the consumers through the fulfillment of their needs. The bottom line of successful supply chain will therefore be timely supplies and maintaining the quality of the products while minimizing the overall costs to the consumer.

Reference List

Anonymous. 2004. HPC Gold Recovery and Mineral Separation Equipment. Web.

Anonymous. 2009. OEM Replacement Parts Catalog. Web.

Blanchard, D., 2010. Supply Chain Management Best Practices. Ontario, John Wiley and Sons. Web.

Borade, A. B. and Bansod S. V., 2007. Domain of supply chain management-A state of art. Journal of technology management and innovation. Web.

HP Publishes New Guidelines for Supply Chain Sustainability. 2008. HP Publishes New Guidelines for Supply Chain Sustainability. Web.

Hugos, M. H., 2006. Essentials of supply chain management. 2nd edition. New Jersey, John Wiley and Sons. Web.

Lambert, D. M., 2008. Supply chain management: processes, partnerships, performance. Florida, Supply Chain Management Institute. Web.

Lamb, C. W., Hair J. F. and McDaniel, C., 2008. Essentials of Marketing. 6th edition. London, Cengage Learning. Web.

Monczka R. M., Handfield R. B. and Giunipero L., 2008. Purchasing and Supply Chain Management. Ontario, Cengage Learning. Web.

Rockford consulting Group. 2009. Supply Chain Management. Web.

Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E., 2004. Managing the supply chain: the definitive guide for the business professional. NY, McGraw-Hill Professional. Web.

Study Reveals Companies Lack Supply Chain Sustainability. 2009. Study Reveals Companies Lack Supply Chain Sustainability. Web.

Supply chain management. 2009. Supply chain management. Web.

Wisner, J. D., Tan K. and Keong, L. G., 2008. Principles of Supply Chain Management. London, Cengage Learning. Web.

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