Supply chain management involves the active streamlining of the supply-side activities of a business. This includes coordinating activities with suppliers, retailers, distributors, and customers. It aims to reduce excess inventory and minimize the number of days a product sits on shelves. People who work in supply chain management should be adaptable and have strong analytical skills.
Supply chain management is the active streamlining of the supply-side activities of a business
Supply chain management is an integrated process that involves the procurement of raw materials, processing of those raw materials into finished products and distribution of those products to the end consumer. The process is designed to optimize customer value and competitive advantage. It is the basis for any business operation. Every decision regarding products and services is influenced by these processes.
A firm must maintain end-to-end visibility of its supply chain activities, including tracking and milestone-based reporting. This will foster customer trust and cooperation. Recent events such as the coronavirus and incorrect information about contaminated food have caused a dramatic shift in consumer buying patterns. As a result, firms must invest in campaigns and other strategies to convey the correct information to consumers and reassure them that their products are handled safely.
Streamlining the supply chain can improve the efficiency of business operations. It allows for real-time visibility, which enables proactive supply-chain changes. Moreover, it helps companies control costs and inventory. They can also predict demand better. This will help them introduce new products based on their popularity and make sure that they always have a supply of these products in stock.
Supply chain management is divided into three levels: strategic, tactical and operational. The strategic level deals with big-picture decisions, while the tactical level focuses on specific processes. Strategic level is concerned with identifying what customers want and need, while the tactical level focuses on minimizing costs and risks.
The second most significant challenge that organizations face is scarcity of material. The COVID-19 pandemic, panic buying and hoarding have boosted the per unit prices of many materials, making the supply-side activities of the business more complex. During a crisis, people are not willing to wait long for the products to be available. As a result, time is an essential issue.
A supply chain can be hindered by lack of material and a lack of skilled labor. In such a situation, overstocking inventory can lead to problems, including damage and perishability. It can also block working capital. There are a number of other challenges associated with supply-side activities.
Supply chain resilience is the ability to respond quickly to changing environments. Supply chain resilience helps firms maintain their position in the market and adapt to rapid changes. In a changing environment, firms must quickly reorganize their resources, competencies, and overall capabilities.
In addition to the above-mentioned challenges, transportation is also an important part of supply chain management. Without adequate vehicles, raw materials cannot be transported to customers on time and finished goods can be delayed. This can cause a serious disruption in the supply chain.
It involves the coordination of procurement, suppliers, retailers, distributors and customers
In order to run a business, a company needs to coordinate the movement of raw materials, finished goods, and parts from the point of origin to the final destination. Typically, the physical flow of goods begins with a supplier sourcing raw materials, and continues through a manufacturer, retailer, distributor, and customer. Certain supply chains skip some steps, but all physical items must be transported and stored in some way to meet their ultimate destination. Ultimately, this requires careful planning to avoid down-stream problems and ensure quality products and services are available.
As companies became more globally competitive, they began to look for ways to streamline their supply chains. Many of them chose vertical integration to lower costs. By the 1980s, globalization became a more feasible vision for companies, and communication systems and commerce-friendly trade laws made it possible. In addition, firms began to focus on core competencies and outsource other functions, increasing the complexity of the supply chain.
The first function of supply chain management involves purchasing. In order to create products, companies need raw materials that are delivered on time. This requires coordination with suppliers to prevent delays. Once a company knows what its customers want, it can start planning production accordingly.
Effective supply chain management requires the efficient use of transportation. Using the appropriate type of transportation will make the entire process more efficient and cost-effective. It also helps supply chain members centralize inventory and operate with fewer facilities. In addition, carriers make operating decisions to maximize the return on their assets.
Successful supply chain relationships are based on a number of components, including two-way communication, effective measurement, and a platform for conflict resolution. Successful relationships with suppliers are the foundation for successful retailing. In order to maintain a healthy and long-term relationship, retailers need to include their suppliers in the decision-making process.
The process of supply chain management is comprised of four main parts: demand management, inventory management, product portfolio management, and supply planning. These four components help to ensure that a company has adequate resources to meet consumer demands. It also includes the planning of the sales and operational strategies.
It aims to minimize the days and minimize the risk of excess inventory
A major goal of supply chain management is to minimize the risk of excess inventory by reducing the number of days that inventory is not available for sale. Excess inventory curtails the operation of a business and is costly. Supply chains can help companies reduce these risks by using a variety of strategies.
Excess inventory often occurs because manufacturers are forced to deliver more merchandise than they can sell. Most distributors do not need a full container load to meet demand. In these cases, companies markdown their excess stock to reduce the cost of holding it. For example, department stores often sell up to a third of their stock at discounted prices. This lowers their profits and erodes their brand equity. In addition, markdowns anger loyal customers.