Unit2supply chain.docx
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Unit2supply chain.docx
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Unit2supplychain
UnitTwoSupplyChainManagement
PartOneText
TheConceptofSupplyChainManagement
Whatissupplychain?
Thesupplychainistheseriesoflinksandsharedprocessesthatexistbetweensuppliersandcustomers1.Theselinksandprocessesinvolveallactivitiesfromtheacquisitionofrawmaterialstothedeliveryoffinishedgoodstotheendconsumer.Rawmaterialsenterintoamanufacturingorganizationviaasupplysystemandaretransformedintofinishedgoods.Thefinishedgoodsarethensuppliedtoconsumersthroughadistributionsystem.Generally,severalcompaniesarelinkedtogetherinthisprocess,eachaddingvaluetotheproductasitmovesthroughthesupplychain.
Infact,theparticipantsofasupplychainincludeallcompaniesororganizationswithwhichthefocalcompanyinteractsdirectlyorindirectlythoughitssuppliersorend-users2.Inanygivensupplychainthereissomecombinationofcompanieswhoperformdifferentfunctions.Therearecompaniesthataresuppliers,manufacturers,distributorsorwholesalers,retailers,andcompaniesorindividualswhoarethecustomers,thefinalconsumersofaproduct.Supportingthesecompaniestherewillbeothercompaniesthatareserviceprovidersthatprovidearangeofneededservices.
However,tomakeaverycomplexsupplychainnetworkmoremanageable,thebasicparticipantsofasupplychaincanbesummarizedas:
Suppliers-Theyareorganizationsthatprovidegoodsand/orservicestoapurchasingorganization(amanufactureroradistributor).
Manufacturers(producers)-Theyarethecompaniesthatmakeaproduct.Thisincludescompaniesthatareproducersofrawmaterialsandcompaniesthatareproducersoffinishedgoods.Producerscanalsocreateproductsthatareintangibleitemssuchasmusic,entertainment,software,ordesigns.
Distributors–Theyarecompaniesthattakeinventoryinbulkfromproducersanddeliverabundleofrelatedproductlinestocustomers3.Distributorsarealsoknownaswholesalers.Theyselltootherbusinessesandtheysellproductsinlargerquantitiesthananindividualconsumerwouldusuallybuy.Adistributoristypicallyanorganizationthattakesownershipofsignificantinventoriesofproductsthattheybuyfromproducersandselltoconsumers4.Inadditiontoproductpromotionandsales,otherfunctionsthedistributorperformsareinventorymanagement,warehouseoperations,andproducttransportationaswellascustomersupportandpost-salesservice5.
Retailers-Theyarecompaniesthatstockinventoryandsellinsmallquantitiestothegeneralpublic.Thisorganizationalsocloselytracksthepreferencesanddemandsofthecustomersthatitsellsto.Itadvertisestoitscustomersandoftenusessomecombinationofprice,productselection,service,andconvenienceastheprimarydrawtoattractcustomersfortheproductsitsells6.
Customers-Theyareanyorganizationthatpurchasesandusesaproduct.Acustomerorganizationmaypurchaseaproductinordertoincorporateitintoanotherproductthattheyinturnselltoothercustomers7.Oracustomermaybethefinalenduserofaproductwhobuystheproductinordertoconsumeit.
Serviceproviders-Theyareorganizationsthatprovideservicestoproducers,distributors,retailers,andcustomers.Serviceprovidershavedevelopedspecialexpertiseandskillsthatfocusonaparticularactivityneededbyasupplychain.Somecommonserviceprovidersinanysupplychainareprovidersoftransportationservicesandwarehousingservices.Financialserviceprovidersdeliverservicessuchasmakingloans,doingcreditanalysis,andcollectingonpastdueinvoices8.Someprovideproductdesign,marketresearchandadvertising.Stillotherserviceprovidersofferinformationtechnologyanddatacollectionservices.
Therefore,mostsupplychainsexhibitthesebasiccharacteristics:
1.Thesupplychainincludesallactivitiesandprocessestosupplyaproductorservicetoafinalcustomer.
2.Anynumberofcompaniescanbelinkedinthesupplychain.
3.Acustomercanbeasuppliertoanothercustomersothetotalchaincanhaveanumberofsupplier–customerrelationships.
4.Whilethedistributionsystemcanbedirectfromsuppliertocustomer,dependingontheproductsandmarkets,itcancontainanumberofdistributorssuchaswholesalers,warehouses,andretailers9.
5.Productsorservicesusuallyflowfromsuppliertocustomer.Likewise,designanddemandinformationusuallyflowsfromcustomertosupplier.(Physicalproductsmove“downstream”,whiledemandinformationflows“upstream”.)
Asupplychainhasthreekeyparts:
Supplyfocusesontherawmaterialssuppliedtomanufacturing,includinghow,when,andfromwhatlocation.
Manufacturefocusesonconvertingtheserawmaterialsintofinishedproducts.Distributionfocusesonensuringtheseproductsreachtheconsumersthroughanorganizednetworkofdistributors,warehouses,andretailers.
WhatisSupplyChainManagement?
Insimplewords,supplychainmanagementreferstoeffectivelyandefficientlyoperatethewholesupplychainprocess.Supplychainmanagementisoneofthemostimportantstrategicaspectsofanybusinessenterprise.Decisionsmustbemadeabouthowtocoordinatetheproductionofgoodsandservices,howandwheretostoreinventory,whomtobuymaterialsfrom,andhowtodistributetheminthemostcost-effective,timelymanner10.
Asweallknow,companiesthatdobusinesstogetherarelinkingupclosely.Theyaredoingthistobettercoordinatetheiractionsanddrivecostsoutoftheirbusinessoperations.Thereisadifferencebetweentheconceptofsupplychainmanagementandthetraditionalconceptoflogistics.Logisticstypicallyreferstoactivitiesthatoccurwithintheboundariesofasingleorganizationandsupplychainsreferstonetworksofcompaniesthatworktogetherandcoordinatetheiractionstodeliveraproducttomarket.Alsotraditionallogisticsfocusesitsattentiononactivitiessuchasprocurement,distribution,maintenance,andinventorymanagement.Supplychainmanagementacknowledgesalloftraditionallogisticsandalsoincludesactivitiessuchasmarketing,newproductdevelopment,finance,andcustomerservice.
Tobemorecompetitive,companiesarebuildinguptheirexpertiseandefficienciesintheprocessofdesigningandbuildingnewproductsandintheprocessofdeliveringandservicingexistingproducts.Companiesthatdevelopbettersupplychainmanagementskilllevelsareclearlybetterabletogainmoreprofitsfromthemarkettheyserve.
Theprocessesinvolvedinthedesigning,building,anddeliveringofproductstothecustomersthatneedthemhascometobereferredtoassupplychainmanagement.Noonecompanycandevelophighskilllevelsinallareasofsupplychainmanagementsocompaniesarefocusingondevelopingandbuildingtheirparticularstrengths,theircorecompetencies11.Companiesaredefiningtherolestheywanttoplayinthemarkettheyserveandlinkingupwithothercompaniesthathavecomplementaryskillsets.Thisisthemajordriveofthemodernsupplychains.
Supplychainsencompassthecompaniesandthebusinessactivitiesneededtodesign,make,deliver,anduseaproductorservice.Businessesdependontheirsupplychainstoprovidethemwithwhattheyneedtosurviveandthrive.Everybusinessfitsintooneormoresupplychainsandhasaroletoplayineachofthem.Thepaceofchangeandtheuncertaintyabouthowmarketswillevolvehasmadeitincreasinglyimportantforcompaniestobeawareofthesupplychainstheyparticipateinandtounderstandtherolesthattheyplay12.Thosecompaniesthatlearnhowtobuildandparticipateinstrongsupplychainswillhaveasubstantialcompetitiveadvantageintheirmarkets.
Theterm“supplychainmanagement”aroseinthelate1980sandcameintowidespreaduseinthe1990s.Priortothattime,businessesusedtermssuchas“Logistics”and“operationsmanagement”instead.Ifweacknowledgethatsupplychainmanagementissomethingwedotoinfluencethebehaviorofthesupplychainandgettheresultswewantthenwecanmakethisdefinition:
“Supplychainmanagementisthecoordinationofproduction,inventory,location,andtransportationamongtheparticipantsinasupplychaintoachievetheefficiencyforthemarketbeingserved.13”
Therefore,SupplyChainManagementisthemethodologytoimprovethebusinessefficiencyinfindingrawcomponentsforyourbusinessproductorserviceanddeliveringittothecustomer14.Itcontainsfivebasiccomponents:
Plan-Strategiesformanagingresourcestowardmeetingcustomerdemandforgoodsandservices.
Source-Selectionofsupplierstodelivermaterialsorservicesforthemakingofgoodsandservices.
Produce-makingofgoodsandservices,whichmayincludeproduction,testingandpackaging.
Deliver-Coordinateordersfromclients,carrierssendingproductsandreceivingpayments.
Return-Networkforreceivingdefectiveorexcessiveproductsfromclient.
Thegoalofsupplychainmanagementistoincreasesalesofgoodsandservicestothefinal,endusecustomerwhileatthesametimereducingbothinventoryandoperatingexpenses15.
BenefitsofEffectiveSupplyChainManagement
Effectivesupplychainmanagementisthekeytoacompetitivebusinessadvantage.
Theeightmajorbenefitstoeffectivesupplychainmanagementcanbesummarizedasfollows:
1.Improvedcustomerservice:
havingtherightproducts,availablefordeliverywhenrequested,atagoodprice.
2.Reductionofcostsacrossthesupplychainandmoreefficientmanagementofworkingcapital.
3.Moreefficientmanagementofrawmaterials,work-in-process,andfinishedgoodsinventory.
4.Increasedefficiencyinthetransactionsbetweensupplychainpartners
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