Logistics supply chain control is one of the most contemporary and challenging concept in today’s corporate environment. As a result of increasing global demand of business; transportation, procurement, manufacturing, distribution activities increased immensely. Now a day, major firms are focusing on SCM to minimize cost and constantly trying to develop new progressive strategy to meet consumer demand to attain competitive advantage.
2 Definition of Supply Chain Management:
In short, supply chain management means, right product at the perfect place in the right time on the right measure and also at the right quantity. As an example, in a supermarket, when the consumer present in a product shelves, there is certainly tag for your product but no product in shelves; what you think? Yes, this is because of poor management of SCM. More precisely, SCM is the control over 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 very important?
As global competitions are increasing customer have different choices & needs to satisfy demands. For instance, if you will find demand for umbrella in rainy season and when you asked supplier to offer 20,000 umbrellas in summer and supposed to receive at the start of rainy season; what exactly do think would probably happened?
In accordance with this scenario, say as an example, supplier response lately after fourteen days, slowly starting procurement and then starting production and supply the goods at the conclusion of rainy season. Consequently, in this instance the customer will face tremendous losses.
Let’s consider how could, we change our scenario with the effective strategy: take into account the order of umbrella was given at the conclusion of spring to offer 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 on time and arrive within 30th days in summer. The buyer is pleased to receive items on time and that allows the buyer to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the marketplace in the proper time and earning money.
In past manufacturers were known as the drivers of the supply chain because they were scrambling to meet customer demands at rapid pace but now customer is called the driving shots in a long term competitive advantage. To satisfy the client demand accordingly, companies are shifting to customer oriented strategy (a bright example could be ‘Dell computer’). Hence, to attain competitive advantage available in the market, it’s required to provide the product in the peak time.
4 Key Drivers of Logistics Supply Chain Management:
Through the analysis different journal article, textbook, web research we found the real key drivers are differ in based on 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 fulfill the customer demand in market. Thus, companies are facing huge challenges to meet the criteria globally. Through the product barriers are eliminated, no goods are now considering domestic products but as a result of globalization forces companies have a tendency to change policy and strategy regularly. Besides, with the benefits from globalization now, foreign investor are encouraged to put money into several countries which forces local companies to enhance quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for the companies.
For example, a business can develop a product inside the US, manufacture in China then sell in worldwide, i.e. Apple. As a result an intricate and challenging activities for company. Thus, to be able to 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 take advantages of capturing large market. This strategy, allows Apple to get 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 generally speaking is complex for managing SCM.
For example, green environment (i.e. carbon emission); local government are usually imposing regulations which impact on the producer. For example, production and manufacturing in western world like in Europe is large challenge as as a result of strict rules and policies of environmental issues can compare to underdevelop countries as with Asia. For example, in automobile industry producing vehicles is challenging as a result of environmental issues in different 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, as a result of geographical distance and expense, companies often couldn’t able to cope up with customer expectation.
4.3.2 b) Production: Cost fluctuation from production levels are critical issue for strategic decision, such as what product to create, which plant to allocate and what supplies to obtain 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 even days of inventory in hands as well as price increases throughout the periods of inflation affects.
4.3.4 d) Transportation: 30 percent of logistics cost associate with transportation that creates the companies to consider distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is chap but time-consuming.
Consumers are by far the most unpredictable variables to determine demand. Frequent changes of demand, new expectation, changing approach of existing product, influential behaviour attitude towards items are all determine to build up a consumer-product innovation strategy. For instance, Apples starts it business around the bases of computers but after understanding need for consumer, they launched iPhone, iPad, iPod as means 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 marketplace the whole market.
The example here offers a key learning tool ‘how the organization understand its customer to accomplish competitive advantage’ making us to consider what strategy they are following. In Apple strategy the majority of the iPhone and iPad items (i.e. parts) are outsourcing. More precisely speaking, only a few components are made by Apple, hardware comes by contract manufacturer and software comes by an incredible number of software developer to build various applications for that devices which minimize the fee.
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 support this model, Dell asked suppliers to maintain inventories within 15 minutes from 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. This 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 increasingly technological oriented centering on online trading, online shipping, online payment, online information, online virtual chatting, and so forth. This technological process features a greater effect on customers now a day customers 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 achievements of Dell’s direct sells strategy depends mostly on continuous growth and development of technological aspect because the customer ready to be a little more connected, assist these to develop economical quality product strategy.
Transport system is the most important economic activity among the aspects of business logistics systems. Around one third to two thirds in the expenses of enterprises logistics expenses are invested in transportation. Beside good transportation is challenging issue to deliver product at proper time. Thus, to permit flow of goods from one destination to another one as well as ensure punctually delivery; companies must understand the right strategy of supply chain. However, unorganized transportation system, labour force, policies, laws and regulations, uncategorized rooting system is a big 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.