Supply Chain Management: Main Steps

Introduction

As organizations struggle to become more flexible and focus their attention on core proficiencies, they end up trimming down their channels of distribution and lowering their tenure of the sources of raw materials. These roles are getting delegated gradually to other entities which can carry out the functions more efficiently and cost effectively. As a result, there is an increase in the number of organizations whose common goal is to satisfy consumer demands by using very few logistic operations. Consequently, this has led to the emergence of supply chain management models.

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Supply chain management refers to the supervision of information, resources and finances as they move sequentially from the supplier to reach the consumer. It is a system of interrelated businesses which are involved in the integration and synchronization of both the supplier, the manufacturer, the wholesaler, the retailer and the consumer within a given company or among different companies. The most crucial goal of any supply chain management network is to minimize inventory under the perception that supplies are always reachable whenever they are required. Supply chain management networks can be classified into three major types of flows: the product flow, the information flow and the finances flow. In the product flow there is the movement of products from the supplier to the consumer. There is also the backward movement of products which are returned by the consumer. The information network consists of the transmission of orders and renewal of delivery statuses. Lastly, the financial network is a flow that consists of payment programs, credit terms, and title tenure and delivery provisions.

Supply chain management involves scheduling and managing all activities that are necessary for product acquisition, product transfer, procurement and logistic procedures. It also incorporates the critical elements of dexterity and teamwork with other partners in the channel. Some of these channel partners include suppliers, consumers and all the umpire service providers. Basically, supply chain management involves the incorporation of the supervision of demand and supply within and among corporations.

Thesis Statement

As aforementioned, supply chain management cuts across many functions in any organization. It involves the management of the flow of raw materials into a corporation, the processing of these raw materials into finished products and the flow of the finished products to the end customer. This paper seeks to analyze the logistic systems that are involved in the whole process, the drivers and facilitators of successful supply chain management, metrics and the role that customers play in developing supply chain metrics, some of the logistic problems which arise when supply and demand for a particular product are not aligned properly, the role of transportation in the supply chain, the primary capabilities, advantages and disadvantages of direct distributions, distribution centers (DC’s) and cross-docks and the steps involved in the process of logistics or supply chain network design.

Vital managerial activities in logistic systems

Logistics can be defined as the activity of planning, executing and organizing cost-effective and efficient movement and storage of raw materials, materials that are at the processing stage and the finished ones1. It also involves the linking of information from the original point to the terminal point so as to meet the needs of the consumer. It is a process which is responsible for a controlled flow and storage of goods while they pass through the chain of supply. Organizations may at times incorporate sales projection, production planning, intermediary operations and management of customer services among other activities in the logistics. Some of the managerial activities that are usually included in logistic systems include procurement/ purchasing, warehousing management, transportation management, inventory management and demand management.

Procurement/ Purchasing

The movement of supplies through any firm is always instigated when the procurement department issues a given supplier with an order of purchase. Therefore, it is the work of the procurement section to search for appropriate suppliers of the required materials, negotiate with them for favorable terms, and arrange for the delivery of the goods and for imbursement and insurance of the materials.

Warehousing management

Warehousing management involves the movement of materials into the storage facilities and maintaining them in good condition until the time when their demand arises. Materials such as foodstuffs, chemicals, drugs, alcohol etc need special storage facilities so as to retain their good condition. Warehousing ensures quick access to materials when needed. It also ensures that these materials are kept under proper conditions, correct packaging and correct treatment.

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Transportation management

Transportation management involves mobilization of an organization’s inventory so as to ensure timely delivery of goods and services to the right consumer at the right place. It also ensures that the delivered goods have the right condition and correct prices. This is aimed at reducing costs, improving the quality of services and circumventing fines and delays in the delivery of goods.

Inventory management

Inventory refers to the record of all the goods and resources that are stocked by an enterprise. Basically, the management of inventory specifies the amount and the location of the materials and goods that are stocked by an organization. It is aimed at protecting the usual and the arranged path of production against unsystematic interruption due to the shortage of goods or materials.

Demand management

Management of demand is a very intricate task for many companies. Nevertheless, many customers can no longer tolerate service failures and markets have turned out to be more volatile. Therefore, the management of demand has become inevitable. For any company to survive and increase its profits, it must be able to predict demand and deliver the required goods by consumers at any time.

Drivers and facilitators of successful supply chain management

The success of any supply chain management system depends on some factors which are classified either as drivers or facilitators of successful supply chain management. The drivers may include asset/ cost efficiency, customer service and marketing advantage. On the other hand, facilitators may include corporate compatibility, management philosophy and techniques and mutuality of commitment2.

Asset/ cost efficiency in an organization goes beyond the management of costs by looking at maximization of the possible income generators using the available capital. It ensures that the productivity of both the fixed and current assets in the organization is optimized thus discharging some cash which can be used more purposefully.

Excellent provision of customer services ensures that customers leave the enterprise happily and this increases their chance of coming back to the business. It also increases their chance of portraying a positive image of the business to other people therefore attracting them to the business.

Having a market advantage over other competitors brings about success and increased profitability in the business. Marketing advantage can be brought about through the promotion of creativity and innovation in the venture, through the application of modern technology and the pros of experience among many other factors.

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The facilitators of supply chain management include corporate compatibility which refers to the smooth interaction of all the elements within the corporation and among other corporations, for instance in terms of communication. Secondly, there is the aspect of management philosophy and techniques which are essential requirements for all managers. In essence, managers who build their own viable management philosophies have been found to be more effective than their counterparts who don’t thereby bring success to the organization. Lastly, mutuality of commitment by all elements in the organization tends to facilitate its supply chain management systems.

Supply chain metrics

In any business organization, the management of supply chain is a very crucial activity because its proper management may lead to many advantages that other major business rivals may not get. Effective supply chain management leads to customer satisfaction. This is because it is a practice which ensures prompt delivery of high quality goods to customers. Therefore, it is very vital to ensure that all the elements of the supply chain in the organization are functioning appropriately. This can only be done using supply chain metrics. Since effective supply chain management is a practice that aims at customer satisfaction, consequently, metrics must focus upon the needs and expectations of the customer.

Supply chain performance refers to the extension of the activities of the chain supply so as to satisfy the needs of the consumer. These needs include availability of goods and services and their prompt delivery. Customers have become more important in performance measurement because without them there would be no business after all. A well prepared metrics calls for adequate customer supervision, careful planning and warehouse management among other factors.

Logistic problems

The supply chain logistic problems that face many companies today may be very intricate. They involve several restraints and a wide range of stakeholders within the total enterprise. In most cases, communication is hindered within different sectors or branches of an organization such as the planning department, trading department and the operations department, making each one of them to shift to their own specific goals and objectives. This affects the profitability of the entire enterprise in the long run.

The flexibility of demand and supply is a very vital component for effective execution of customization policies which produce unrelenting competitive benefits within an enterprise. Supply flexibility gives the customers the ability to choose from a wide range of alternative commodities which can perform similar functions. It is sustained by the existence of a variety of potentials available in swift and flexible supply chains and manufacturing schemes. On the other hand, demand flexibility results from the willingness of customers to compromise on certain features of a product and on the levels of performance so as to satisfy the constraints of time and money.

Proper alignment of the demand and supply for a particular product may lead to considerable financial and strategic benefits to the logistics of a given enterprise. Nevertheless, the reverse is very detrimental. In most instances, consumers are usually unacquainted with the structure of the demand and supply flexibilities and this impact negatively on the logistics of a company in terms of promptness and production cost3.

The role of transportation in the supply chain

Transportation enhances the effectiveness of product movement through an enterprise. It is a very vital component in the operation of logistics since it increases the delivery speed, reduces operation costs and improves service delivery for a given product. The advantages of logistics can not be realized in the absence of appropriate transportation systems. Development of appropriate transportation systems should draw efforts from both the private and public sectors since effective logistic systems enhance the competitiveness of both the private enterprises and the government.

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The role of transportation in the supply chain goes beyond mere transportation of goods to their owners. Indeed, it is a very complex phenomenon which can only be initiated by an outstanding management team. A well operated transport system ensures that goods are sent to the customers at the right time so as to meet their demands. An appropriate transport system enhances efficiency in an enterprise. It also creates a link that connects the consumers and the producers. As such, transportation forms a basis for the effectiveness of business logistics. Moreover, it translates to a lot of benefits to corporate competitiveness and to the quality of services.

In as much as transportation provides crucial support to the supply chain within a given enterprise, it is erroneous to presume that these roles can be easily achieved. There are several transportation challenges which can hinder effective supply chain performance. These challenges could be escalated by the complexity of the supply chain itself, the contending goals that exist among other chain partners, the ever changing consumer specifications and the lack of enough information. Some of these challenges include the ever increasing transportation rates, infrastructural challenges, customer demands and increased outsourcing, specifically offshore manufacturing which create very great transportation challenges

Direct distribution, DC’s and Cross docking

Direct distributions, DC’s and cross docking requires that product characteristics be able to determine the structure of the distribution route. There are two procedures that can be used to move the products: direct shipment and movement of the items to the consumers using facilities of distribution. Another capability requirement is that they must analyze the stock, the service trade offs and the transportation systems before deciding to use either direct shipping or the facilities of distribution.

Direct distribution refers to a system of marketing which involves the manufacturer selling his goods directly to the consumers without any retailing process. It is a powerful customer service method which involves generating and conveying customized answers for transportation, delivery and storage of goods. Direct distribution helps in creating a customized schedule which meets the instant demands of the customers. It also instigates an incessant expansion and open communications which bring about success in the enterprise.

A distribution center (DC) for a particular product can be defined as a special building or a warehouse containing sophisticated equipment like air conditioners and refrigeration facilities which is used for stocking goods that are awaiting distribution. It is a fundamental requirement for the order processing aspect in the process of order fulfillment. Distribution centers are usually driven by demand. They form the basis for a supply chain because they permit a distinct location to reserve a wide range of products.

Cross docking refers to the activity of receiving goods and then processing them immediately for the purpose of reshipment. It involves very minimal handling of the goods with no storage at all. The main goal of cross docking is to enhance customer service through ensuring a persistent flow of goods from the source to the consumers.

Steps involved in the process of logistics/supply chain network design

Supply chain management refers to the integration of art and science for the purpose of helping the company to search for new ways of acquiring the raw materials that it requires in order to promote the delivery of its products and services to the customers. There are five steps that can be followed while designing a supply chain network. These are: planning, sourcing, making, delivering and returning4.

Planning is the most strategic step in designing a supply chain network. All firms need to come up with strategies to be used in the management of their resources in order to meet their consumer demands. Designing a supply chain network involves the formation of a set of metrics whose purpose is to monitor the chain of supply to ensure that it is cost effective, efficient and consumer driven.

The next important step is sourcing. Here, the company is required to decide on the suppliers who would deliver the materials which it requires in order to manufacture its product. This calls for the supply chain managers to construct pricing guidelines, delivery procedures and modes of payment with the suppliers through creating metrics that would check and enhance their relationship.

After sourcing, the company moves to the manufacturing step. The manufacturing process requires the supply chain managers to plan the activities that are essential for the production process, product testing, and packaging and delivery arrangements. It is the most metric-concentrated component of the supply chain. At this stage, companies can measure the output of their employees, the level of productivity and the quality of the products.

The next step is the delivery step which can also be referred to as logistics. Here, the company synchronizes the customer’s receipts, establishes warehouses, organize carriers and develops an invoicing system for the purpose of receiving payments on orders.

Lastly, there is the return step which usually causes a lot of problems to supply networks of many organizations. Therefore, the planners of the supply chain need to construct flexible and receptive networks which would receive back from the consumers’ the surplus products and those that are faulty.

Footnotes

  1. John, T 2001, Supply Chain Management, Sage Publications, Inc, New York.
  2. John, J, Edward, J & Langley, J 2009, Supply Chain Management: A logistics perspective, Cengage Learning, Michigan.
  3. John, J, Edward, J & Langley, J 2009, Supply Chain Management: A logistics perspective, Cengage Learning, Michigan.
  4. John, T 2001, Supply Chain Management, Sage Publications, Inc, New York.
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