Logistics supply chain management is one of the most contemporary and challenging concept in the present business community. Because of increasing global need for business; transportation, purchasing, manufacturing, distribution activities increased tremendously. Now a day, major firms are focusing on SCM to lessen cost and constantly trying to develop new innovative tactic 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 best place on the perfect time on the right measure and also at the right quantity. For instance, within a supermarket, when the consumer found in a product shelves, there is certainly tag for your product but no product in shelves; your opinion? Yes, that is because of poor handling 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 in order to meet consumer demands.
3 Why Supply Chain Management is Important?
As global competitions are increasing customer have different choices & needs to satisfy demands. For example, if there are need for umbrella in rainy season and in case you asked supplier to deliver 20,000 umbrellas in summer and supposed to receive at the outset of rainy season; exactly what do think could possibly happened?
According to this scenario, say for example, supplier response lately after 2 weeks, slowly starting procurement and then starting production and supply the goods at the conclusion of rainy season. Because of this, in this case the purchaser will face tremendous losses.
Let’s imagine how could, we change our scenario with the effective strategy: consider the order of umbrella was given at the conclusion of spring to provide at the end of summer. Supplier response precisely, starting from procurement to distribution utmost efficiently and transported through freight within one week before ending summer. The delivery was on time and arrive within 30th days in summer. The purchaser is pleased to receive items promptly and this allows the purchaser to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the marketplace in the proper time and making money.
In past manufacturers were known as the drivers of the supply chain as they were scrambling to satisfy customer demands at rapid pace however customer is referred to as the driving shots in a lasting competitive advantage. To satisfy the customer demand accordingly, companies are shifting to customer oriented strategy (a bright example will be ‘Dell computer’). Hence, to attain competitive advantage 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 the analysis different journal article, textbook, web research we found the key drivers are differ in based on different perspective, like 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 fulfill the consumer demand in market. Thus, companies are facing huge challenges to meet the criteria globally. Through the product barriers are eliminated, no products are now considering domestic products but as a result of globalization forces companies often change policy and strategy regularly. Besides, using the benefits from globalization now, foreign investor ought to put money into several countries which forces local companies to enhance quality of existing items that create huge challenges in procurement, manufacturing, transportation and distribution activities for that companies.
For instance, a business can produce a product inside the US, manufacture in China then sell in worldwide, i.e. Apple. This will make a complicated and challenging activities for company. Thus, so that you can maintain global demand Apple makes strategic option 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 benefits of capturing large market. This tactic, allows Apple to get number ONE innovative company in the world.
Creating sustainable chain includes a major concern for companies. Constant variable pressure from regulations, geographic in nature, social-economic impact, international policies and principles generally speaking is complex for managing SCM.
For example, green environment (i.e. carbon emission); local government are always imposing regulations which impact on the manufacturer. As an example, production and manufacturing in developed countries as with Europe is huge challenge as because of strict rules and policies of environmental issues compare to underdevelop countries as in Asia. For example, in automobile industry producing vehicles is challenging because of environmental issues in numerous countries.
You will find four major decision areas in cost awareness:
4.3.1 a) Location: Convenient feasible location with availability resources including all facilities will be the primary step of towards of making strategic network. However, due to geographical distance and cost, 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 produce, which plant to allocate and what supplies to get for production.
4.3.3 c) Inventory: Inventory cost varies at different level beginning with raw materials to finished goods. Price is also associated in buffer stock, safety stock or even events of inventory in hands as well as price increases during the periods of inflation affects.
4.3.4 d) Transportation: 30 percent of logistics cost associate with transportation that 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.
Clients are probably 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 develop a customer-product innovation strategy. For example, Apples starts it business on the bases of computers but after understanding demand of consumer, they launched iPhone, iPad, iPod as way of innovations strategy which satisfy customer however, not merely definitely makes the customer delight but introducing facilities like ITunes, music, software application gradually capture the market the entire market.
The example here provides a key learning tool ‘how the business understand its customer to achieve competitive advantage’ making us to think 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 build various applications for the devices which minimize the cost.
Supplier’s motivation is essential for quality, cost and delivery expectations of producing product with value as they have greater influential element 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 aid this model, Dell asked suppliers to keep inventories within a quarter-hour in the manufacturing locations. Virtually all products are designed to order. Every 2 hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. Which means xqrcrh is practically no inventory of parts or products within the factory which happen only because of healthy relationship with suppliers.
With the main benefit of technology, customer are actually increasingly technological oriented focusing on online trading, online shipping, online payment, online information, online virtual chatting, etc. This technological process includes a greater impact on customers now a day consumers are constantly willing to get additional information, answers, regarding their choice, preferences. Dell’s could be an ideal example, how technology impact on business and increase revenue. The achievements of Dell’s direct sells strategy depends mostly on continuous development of technological aspect as the customer willing to be a little more connected, assist those to develop economical quality product strategy.
Transport system is the most essential economic activity amongst the aspects of business logistics systems. Around one third to two thirds of the expenses of enterprises logistics expenses are spent on transportation. Beside good transportation is challenging issue to offer product at perfect time. Thus, to enable flow of goods from one destination to another one and also to ensure on time delivery; companies must understand the best strategy of supply chain. However, unorganized transportation system, labour force, policies, rules, uncategorized rooting system is a big hindrance for supply chain solution. If there is suitable transportation network, delivery in the product to the market not ensured supply chain activities is going to be in jeopardy.