Elements of Supply Chain System
The supply chain system includes demand and supply management. Therefore, prior planning of all the supply chain activities (raw material procurement, production demand, logistics, and distribution) is required to properly manage the supply chain process.
Demand Management: A company emphasizes the needs of customers more than the production of goods. The company is responsible for conveying the existing customer’s needs to all the partners in a supply chain process. Proper synchronization among all the stages of the supply chain adds value to the finished product. As a result, the business can remain competitive by being aware and responding swiftly to customer demands. For example, understanding the target market demand can help manufacturers rationalize resource procurement and inventory control before finally producing the final goods.
Communication: Proper and timely exchange of information among the supply chain partners improves the efficiency of business operations. Over a period, it helps in cost reduction by eliminating unnecessary wastage in the operation process. For example, storing and supplying information along the transportation or distribution channel can prevent unnecessary storing excess inventory. Communication keeps all concerned parties proactive and ready to the customer demands and changing business trend. New opportunities can be realized and harnessed with the help of seamless communication by placing new products in the market and effective campaigning.
Integration: It is a business strategy that improves consistency at all levels of the supply chain. The integration enables all parties to the supply chain to process the shared information efficiently. It helps in improving response time, production time, and reduction of the overall cost. Thus, it enables the companies to manage the lead time, market demand and offer competitive pricing.
Collaboration/Coordination: Information and integration can successfully bring results for companies in the presence of coordination. Coordination between members improves teamwork and empathy to assist and support each other in desperate times. The Supply chain process deals with several unannounced challenges, and collaboration among parties can empower them to resolve the issues at the earliest. Besides, the collaboration also increases professionalism and interpersonal relation among the parties to the supply chain. For example – The target market distribution channels provide necessary information of the customers demand to the manufacturer; as per the information, the producers strategically plan to design a layout of customer needs and act accordingly. Thus, a well-organized supply chain network operated via teamwork and professionalism helps a business launch new products in the target market.
Importance of Supply Chain Management
A supply chain map gives an idea to the companies optimize their resources (material, workforce). The planning and decision-making stages are crucial before investing in the launch of new products or expanding existing products. A strategized supply chain process empowers companies to reduce extraneous expenses and allocate or release funds as per the urgency of time and demand.
Furthermore, the integration and cooperation among the partners to the process make it easier for companies to obtain insight regarding the (customer, competitors) target market. Thus, a supply chain process is significant in identifying potential loopholes and problems in the supply chain network and optimizing the cost using dynamic strategies (planning and decision-making)
Supply Chain Process Components
Following are the components of the supply chain process:
Planning: It is the arrangement and optimization of resources to manufacture products and services to meet customer demand. Planning helps the participants of the supply chain to ensure efficiency and effectiveness in the overall process. In addition, it keeps the companies focused on achieving their goals and visions (customer satisfaction, value generation, healthy competition).
Sourcing: Suppliers are the backbone of a supply chain process. Suppliers start the entire process by supplying raw materials to the manufacturers. Sourcing includes ordering materials, receiving raw components, and payment authorization for the delivery made.
Making: A supplier chain manager coordinates production activities after receiving the raw material resources from the suppliers. It includes the stages of accepting raw material, manufacturing products, quality testing, dumping and recycling the inferior quality products, packaging the final goods, and delivery arrangement.
Delivery: The logistics process is complex as the market demand influences it and affects the customer’s perception (availability and non-availability of product issues). It includes managing customers’ orders, scheduling delivery, payment, dispatch products, invoice generation, and receiving the payment. The modes of delivery determine the speed and swiftness of supply.
Returning and enabling: It includes calling back defective goods or retrieving excess quantity. To keep a check on all the necessary information and legal procedures. It includes finance, IT, portfolio management, and sales, etc.
It is not feasible either for an individual customer or a manufacturer to interact directly. This is because a manufacturer cannot address the needs of an individual customer when desired. Also, an individual customer will not get a price advantage from a manufacturer. An organized supply chain enables the movement of products from the manufacturer to distributor to retailer to a customer in a seamless manner. Each participant in a supply chain has its significance for the effective and efficient functioning of other participants.
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