Logistics supply chain control is one of the most contemporary and challenging concept in today’s business community. As a result of increasing global demand of business; transportation, procurement, manufacturing, distribution activities increased immensely. Now a day, major companies are concentrating on SCM to reduce cost and constantly trying to develop new progressive tactic to meet consumer demand to attain competitive benefit.
2 Definition of Supply Chain Management:
In a nutshell, supply chain management means, right product at the best place at the proper time in the right measure and at the best quantity. For example, inside a supermarket, if the consumer found in a product shelves, there is tag for the product but no product in shelves; your opinion? Yes, this is because of poor management of SCM. More precisely, SCM will be the management of inbound and outbound logistics process to integrate from procurement, suppliers, manufacturers, warehouse, distributors, transportation, and store so that you can meet consumer demands.
3 Why Supply Chain Management is Important?
As global competitions are increasing customer have different choices & must satisfy demands. As an example, if you will find interest in umbrella in rainy season and in case you asked supplier to provide 20,000 umbrellas in summer and supposed to receive at the outset of rainy season; what do think could possibly happened?
In accordance with this scenario, say for instance, supplier response lately after two weeks, slowly starting procurement and then starting production and supply the goods after rainy season. As a result, in this instance the purchaser will face tremendous losses.
Let’s consider how could, we change our scenario with an effective strategy: take into account the order of umbrella was given after spring to deliver after summer. Supplier response precisely, beginning from procurement to distribution utmost efficiently and transported through freight within one week before ending summer. The delivery was punctually and arrive within 30th days in summer. The buyer is very happy to receive items punctually which allows the customer to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the marketplace at the perfect time and making money.
In past manufacturers were known as the drivers in the supply chain since they were scrambling to fulfill customer demands at rapid pace however customer is called the driving shots in a long term competitive advantage. To satisfy the consumer demand accordingly, companies are shifting to customer oriented strategy (a bright example would be ‘Dell computer’). Hence, to achieve competitive advantage available in the market, it’s necessary to provide you with the product at the peak time.
4 Key Drivers of Logistics Supply Chain Management:
From the analysis different journal article, textbook, web research we found the real key drivers are differ in according to different perspective, including 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 of affects to meet the consumer demand in market. Thus, companies are facing huge challenges to meet the requirements globally. Through the product barriers are eliminated, no items are now considering domestic products but as a result of globalization forces companies often change policy and strategy regularly. Besides, with the benefits from globalization now, foreign investor are encouraged to invest in several countries which forces local companies to improve quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for the companies.
As an example, a business can develop a product in the US, manufacture in China and sell in worldwide, i.e. Apple. This makes a complex and challenging activities for company. Thus, to be able to maintain global demand Apple makes strategic choice 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 business to consider advantages of capturing large market. This tactic, allows Apple to become number ONE innovative company in the world.
Creating sustainable chain features a major concern for companies. Constant variable pressure from regulations, geographic by nature, social-economic impact, international policies and principles in general is complex for managing SCM.
As an example, green environment (i.e. carbon emission); local government are usually imposing regulations which affect on the manufacturer. For example, production and manufacturing in western world like in Europe is big challenge as because of strict rules and policies of environmental issues compare with underdevelop countries as in Asia. For example, in automobile industry producing vehicles is challenging due to 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 cost, companies often couldn’t in a position to cope up with customer expectation.
4.3.2 b) Production: Cost fluctuation from production levels are critical problem for strategic decision, including what product to produce, which plant to allocate and what supplies to get for production.
4.3.3 c) Inventory: Inventory cost varies at different level beginning from raw materials to finished goods. Price is also associated in buffer stock, safety stock or perhaps times of inventory in hands along with price increases throughout the periods of inflation affects.
4.3.4 d) Transportation: 30 percent of logistics cost associate with transportation that makes the companies to take into account distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is chap but time intensive.
Consumers are the most unpredictable variables to find out demand. Frequent changes of demand, new expectation, changing approach of existing product, influential behaviour attitude towards goods are all determine to build up a customer-product innovation strategy. For example, Apples starts it business on the bases of computers but after understanding need for consumer, they launched iPhone, iPad, iPod as method of innovations strategy which satisfy customer although not merely helps make the customer delight but introducing facilities like ITunes, music, software application gradually capture the market the complete market.
The example here supplies a key learning tool ‘how the organization understand its customer to attain competitive advantage’ which makes us to believe what strategy they are following. In Apple strategy the majority of the iPhone and iPad items (i.e. parts) are outsourcing. More precisely speaking, not many components are made by Apple, hardware is supplied by contract manufacturer and software is supplied by millions of software developer to construct various applications for the devices which minimize the cost.
Supplier’s motivation is important for quality, cost and delivery expectations of producing product with value as they have greater influential aspect of supplying item. For example, Dell’s direct strategy requires processing orders direct from customer. Dell’s pull technique to build computers o customer’s specifications and deliver within time. To support this model, Dell asked suppliers to maintain inventories within a quarter-hour of the manufacturing locations. Nearly all products are designed to order. Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. Which means xqrcrh is nearly no inventory of parts or products in the factory and also this happen only because of healthy relationship with suppliers.
With the main benefit of technology, customer are actually more and more technological oriented concentrating on online trading, online shipping, online payment, online information, online virtual chatting, etc. This technological process includes a greater impact on customers and now each day customers are constantly willing to get more information, answers, regarding their choice, preferences. Dell’s could be an ideal example, how technology effect on business and increase revenue. The achievements of Dell’s direct sells strategy depends mostly on continuous growth and development of technological aspect since the customer willing to become more connected, assist those to develop affordable quality product strategy.
Transport system is the most important economic activity amongst the aspects of business logistics systems. Around one third to 2 thirds of the expenses of enterprises logistics expenses are used on transportation. Beside good transportation is challenging issue to deliver product at right time. Thus, to allow flow of goods from one destination to another as well as ensure on time delivery; companies must understand the best technique of supply chain. However, unorganized transportation system, labour force, policies, regulations, uncategorized rooting system is a major hindrance for supply chain solution. When there is suitable transportation network, delivery in the product to the market not ensured supply chain activities is going to be at risk.