Supply Chain Management is defined as the cycle that deals with the transformation of raw materials into final products. It is one of the most important concepts in today’s world because it helps the firm to become more competitive as well as reduce costs. Hence, it aims at increasing efficiency as well as effectiveness. The cycle consists of several activities and processes that must be completed in a timely manner. This article aims to discuss the concept of Supply Chain Management. Additionally, it aims to discuss the flows, principles and strategies involved in the same. The discussion will be based on the views of experts in the field as well as personal perspective.
As discussed earlier that the concept includes several processes, one of them is adhering to the Seven Rights of Fulfillment. This includes providing the right product, to the right customer, at the right time, at the right place, in the right condition, in the right quantity, at the right cost (informIT, 2014). This basically means that the seller must have your preferred product available for order, process your order correctly, ship the entire order via the means that you request, provide you with an advanced shipping notification and tracking number, deliver the complete order on time and without damage, and bill you correctly (CSCMP). The ultimate goal of this activity is to provide quality assurance to the customer which thus ensures repeated sales in the future.
It is also important to talk about how this goal of quality assurance is achieved. The three main flows of Supply Chain Management include the product flow, the information flow, and the finances flow. The product flow deals with the movement of goods from supplier to customer. The information flow acts as a secondary step to the product flow. It deals with activities like updating status of orders and deliveries, dispatch details etc. The financial flow as the name suggests, deals with payment schedules, credit or cash terms etc. This flow acts as a final flow to the chain of management. In all the three flows, there are prominent problems that occur on a day-to-day basis. In the product flow, problems occur in the swift movement of products. For example, if any stoppage occurs at different points of the chain, then it leads to increased expenditures which thus reduces the profit margin of the firm. Additionally, in the information flow, if there is reduced interaction between the producer and the consumer then it acts as a hindrance to the information network. In the money flow, if the claims made by the producer do not match with the client’s expectations, then the money does not flow from the producer to the consumer and hence, the entire chain fails to be completed
To ensure an efficient flow cycle, a supply manager usually must ensure visibility of all three flows in the cycle. This helps in identifying critical information for decision making.
To contribute towards efficiency and effectiveness, the supply chain manager usually delegates and divides the roles according to competencies. CSCMP reports “Winning the SCM “game” requires supply chain professionals to play similar roles. Each supply chain player must understand his or her role, develop winning strategies, and collaborate with their supply chain teammates”. The SCM process includes 5 stages namely planning, procurement, production, distribution and customer interface. The planning stage includes one of the most important tasks of designing the supply network and supply chain strategies. The procurement stage as the name suggests includes procurement of the required raw materials and components. The production stage or the conversion stage involves tasks like manufacturing and transforming raw materials into final and finished products. The distribution stage deals with logistics I.e., connecting with external logistical firms and transportation companies to ensure the swift and efficient movement of goods. The last stage I.e., the customer interface stage deals with customer engagement and interaction. It can possibly include after sales services as well.
Although there exist a variety of strategies and principles used in Supply Chain Management as it is dynamic I.e., dependent upon the changing needs of the environment, I will be distilling down to 7 principles with the support of an article in Supply Chain Management Review: “The Seven Principles of Supply Chain Management, Supply Chain Management Review”, 1997.
Principle 1: Adapt supply chain based on service needs of each customer segment. This basically implies a focus on customer needs through the use of segmentation.
Principle 2: Logistics Network Customization. This principle does not hold for all situations; however, it means that with the segmentation of customer needs, the manager or the seller must tailor to various logistic networks.
Principle 3: Optimal Resource Allocation. This is ensured through aligning demand planning accordingly via consistent forecasting and resource allocation
Principle 4: Product Differentiation. This includes increasing product variety dependent upon customer needs. “Dell” is a famous company that uses this principle wherein the firm assembles components only after the customer places the order.
Principle 5: Cost Reduction Strategies. This is done using cost efficient methods like strategic outsourcing and avoiding the outsourcing of the core competency of a firm.
Principle 6: Developing technology efficient strategies which ensure transparency in terms of the flow of goods and services.
Principle 7: Determining Customer profitability through activity-based costing. However, there have been several controversies if the ABC method is successful in today’s world or not.
To conclude, it is truly said that the success of a business is linked to the efficiency of its supply chain. The article has discussed the majority of relevant conceptual introductions to the concept. However, there still exists potential for a lot of information to be discovered because management as a concept is very dynamic. Competitiveness, cost reduction, increasing efficiency and effectiveness are some of the main objectives of supply chain management