Logistics supply chain management is one of the very most contemporary and challenging concept in the present business community. Due to increasing global need for business; transportation, procurement, manufacturing, distribution activities increased tremendously. Now a day, major companies are centering on SCM to minimize cost and constantly trying to develop new revolutionary strategy to meet consumer demand to accomplish competitive advantage.
2 Meaning of Supply Chain Management:
To put it briefly, supply chain management means, right product at the right place on the right time at the right measure and also at the correct quantity. As an example, inside a supermarket, if the consumer seen in a product shelves, there is certainly tag for the product but no product in shelves; your opinion? Yes, this is because of poor management of SCM. More precisely, SCM is definitely the control over inbound and outbound logistics process to integrate from procurement, suppliers, manufacturers, warehouse, distributors, transportation, and store to be able to meet consumer demands.
3 Why Supply Chain Management is essential?
As global competitions are increasing customer have different choices & has to satisfy demands. For instance, if you will find need for umbrella in rainy season and when you asked supplier to provide 20,000 umbrellas in summer and expected to receive at the outset of rainy season; what exactly do think would possibly happened?
According to this scenario, say as an example, supplier response lately after 2 weeks, slowly starting procurement then starting production and supply the goods after rainy season. As a result, in this case the customer will face tremendous losses.
Let’s consider just how can, we change our scenario with an effective strategy: think about the order of umbrella was given at the conclusion of spring to deliver at the conclusion of summer. Supplier response precisely, beginning with procurement to distribution utmost efficiently and transported through freight within one week before ending summer. The delivery was promptly and arrive within 30th days in summer. The buyer is happy to receive items punctually and this allows the customer to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the marketplace on the right time and earning money.
In past manufacturers were referred to as drivers of the supply chain since they were scrambling to fulfill customer demands at rapid pace but now customer is known as the driving shots in a lasting competitive advantage. To meet the customer demand accordingly, companies are shifting to customer oriented strategy (a bright example would be ‘Dell computer’). Hence, to accomplish competitive advantage available in the market, it’s required to provide you with the product on the peak time.
4 Key Drivers of Logistics Supply Chain Management:
From your analysis different journal article, textbook, web research we found the true secret drivers are differ in in accordance with different perspective, such as Globalisation, Sustainability, Cost-awareness, Customers, Suppliers, Technology and Transportation.
The external forces (i.e. political, economical, socio-cultural, technological, legal and environmental), local competition, continuous policy and regulations changes, pressure from international brands and all affects to satisfy the consumer demand in market. Thus, companies are facing huge challenges to meet the requirements globally. With the product barriers are eliminated, no goods are now considering domestic products but as a result of globalization forces companies tend to change policy and strategy regularly. Besides, with the advantages of globalization now, foreign investor are encouraged to spend money on several countries which forces local companies to improve quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for your companies.
For instance, a company can get a product inside the US, manufacture in China and then sell in worldwide, i.e. Apple. This makes an intricate and challenging activities for company. Thus, so that you can maintain global demand Apple makes strategic decision to build global manufacturing and engineering infrastructure in California, Ireland and Singapore to capture market in US, Europe and Asia. This global strategy from Apple allows the organization to adopt features of capturing large market. This strategy, allows Apple to become number ONE innovative company on earth.
Creating sustainable chain features a major concern for companies. Constant variable pressure from regulations, geographic in nature, social-economic impact, international policies and principles in general is complex for managing SCM.
For instance, green environment (i.e. carbon emission); local government will always be imposing regulations which impact on the maker. For instance, production and manufacturing in western world as with Europe is big challenge as as a result of strict rules and policies of environmental issues compare with underdevelop countries as in Asia. As an example, in automobile industry producing vehicles is challenging as a result of environmental issues in numerous countries.
You can find four major decision areas in price awareness:
4.3.1 a) Location: Convenient feasible location with availability resources including all facilities will be the primary step of towards of creating strategic network. However, as a result of geographical distance and expense, companies often couldn’t able to deal with customer expectation.
4.3.2 b) Production: Cost fluctuation from production levels are critical problem for strategic decision, including what product to create, which plant to allocate and what supplies to have for production.
4.3.3 c) Inventory: Inventory cost varies at different level beginning from raw materials to finished goods. Cost is also associated in buffer stock, safety stock or even days of inventory in hands in addition to price increases through the periods of inflation affects.
4.3.4 d) Transportation: 30 percent of logistics cost associate with transportation which makes the companies to think about distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is chap but time-consuming.
Consumers are probably the most unpredictable variables to determine demand. Frequent changes of demand, new expectation, changing approach of existing product, influential behaviour attitude towards goods are all determine to develop a customer-product innovation strategy. For instance, Apples starts it business in the bases of computers but after understanding demand of consumer, they launched iPhone, iPad, iPod as way of innovations strategy which satisfy customer although not merely definitely makes the customer delight but introducing facilities like ITunes, music, software application gradually capture the current market the entire market.
The example here offers a key learning tool ‘how the company understand its customer to achieve competitive advantage’ which makes us to consider what strategy they may be following. In Apple strategy most of the iPhone and iPad items (i.e. parts) are outsourcing. More precisely speaking, only a few components are produced by Apple, hardware is supplied by contract manufacturer and software comes by millions of software developer to develop various applications for your devices which minimize the cost.
Supplier’s motivation is very important for quality, cost and delivery expectations of producing product with value as they have greater influential aspect of supplying item. As an example, Dell’s direct strategy requires processing orders direct from customer. Dell’s pull strategy to build computers o customer’s specifications and deliver within time. To aid this model, Dell asked suppliers to maintain inventories within fifteen minutes from the manufacturing locations. Nearly all products are created to order. Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. This means xqrcrh is almost no inventory of parts or products in the factory and this happen only as a result of healthy relationship with suppliers.
With the benefit of technology, customer are actually increasingly technological oriented centering on online trading, online shipping, online payment, online information, online virtual chatting, etc. This technological process has a greater influence on customers and today a day clients are constantly willing to get additional information, answers, about their choice, preferences. Dell’s could be an ideal example, how technology influence on business and increase revenue. The success of Dell’s direct sells strategy depends mostly on continuous development of technological aspect as the customer ready to become a little more connected, assist them to develop economical quality product strategy.
Transport system is an essential economic activity amongst the elements of business logistics systems. Around one third to two thirds of the expenses of enterprises logistics pricing is used on transportation. Beside good transportation is challenging issue to deliver product at right time. Thus, to enable flow of goods from one destination to another and also to ensure on time delivery; companies needs to understand the best strategy of supply chain. However, unorganized transportation system, labour force, policies, rules, uncategorized rooting system is a major hindrance for supply chain solution. If you have suitable transportation network, delivery from the product for the market not ensured supply chain activities will likely be in danger.