Why Supply Chain Management Is Important Management Essay
Supply chain management is important to company success and customer satisfaction. Supply chain Management and demand management within and across companies (Council of Logistics Management). The role of SCM is increasing in firm because market is mature and competitive. The organization like Wal-Mart they have to minimize and improve their operation at lower cost and provide better service to their customers and supplier or you can say supply chain management activities maximize customer value and reach a sustainable competitive advantage and planning being done in consultation rather than in isolation and better information sharing among the partners. Supply chain manages every single activity and covers all aspect from product development, production, logistics, sourcing and information system needed to support these activities.
Wal-Mart is going to use supply chain to cut cost in 2010.The world biggest retailer estimates that saving of between 5-15% or $4bn-$12bn will be possible by globalising its purchasing. Now Wal-Mart is buying goods direct from manufactures which is currently 20% and it long term plan is to buy 80% of its stock direct and it has already recognized four global merchandising centres for common goods and clothing, with a centre in the UK for the George brand.
(John Ryan-Retail Week)
Why is supply chain management so important?
To gain efficiencies from procurement, distribution and logistics.
To make outsourcing more efficient.
To reduce transportation costs of inventories.
To meet competitive pressures from shorter development times, more new. Products, and demand for more customization.
To manage the complexities of supply chains.
To manage the inventories needed across the supply chain.
In the below you can see the Wal-Mart is on top in retail supply chains. Astounding 95.6% of manufacture respondents and increasing that number by 3.5% point in 2009.
(Top Retail Supply Chains)
Challenges and Opportunities of SCM;
In every company and Organization the SCM big challenges is work properly and achieve the goal. Many manufacturers and distributors are waking up to the possible for the major cost reduction and service expansions offered by implementing best practices in their supply chain. Supply Chain Management is now recognized as a critical business process for companies manufacturing or distributing products. This is because customer demands for most products are ever more demanding – in response time, in choice (e.g. customization) and in seeking more competitive prices – and thanks to globalization. The main challenge of SCM is optimization reducing the overproduction, good transportation system between warehouses and end user; by reducing lead times can results in both financial and efficiency benefits, ensuring that the right level of stock is available to meet the requirements, reducing process steps to a minimum is required to reduce over processing and finally removing the defects by using technique like six sigma.
Wal-Mart is the first company to tell their suppliers what price they want and If you see this really it’s a bring big pressure on their suppler to meet this price, it describer their relationship as tough, but fair because suppliers still they are getting generating profit. Wal-Mart purchase good directly from the company, and there is no middle man include and also Wal-mart computer system allow to suppliers to know when exactly they need more products. This possible by swiftly communication and excellent part of Wal-mart SCM. (Wal-mart)
The technology like EDI, Warehouse management system, CRM, CPFR, EDI etc allow SCM to work more in more efficient way.
In a case study of Levis Strauss company in year 1996 Levi’s sale dramatically goes down from $7.1 billion to $4.1 billion (Girard, 2003). Then company recognized the problem and take action. The new product also required a change in distribution and easy to access to target market shop then they patch with Wal-mart, who provide them easy access to the and volume of customers. But again a issue a rise with levis the company unable to control the distribution process, Levi’s executives cannot track where is product was moving and in which factory manufacturing and how many product still in distribution centres.Chief Information officer ,David Bergen addressed these problem and implementing information technology. These systems allowed executives to see at a glance how the products are selling in comparison to competing products, how products are moving in the distribution chain, how many products are available for sale, what the demand is at the stores, and whether the supply of products is meeting demand (Girard2003).
(León-Pena J.R. - e-Business and the Supply Chain Management)
Barriers and enablers of successful SCM;
The Human nature is fundamental SCM barrier. But if consider like Inadequate information sharing, poor/conflicting measurement inconsistent operating goals, resistance to change-lack of trust ,lack of managerial commitment, constrained resource, no employee passion/empowerment. Research at the University of Tennessee have identified several impediments, lack of trust, continued presence of functional silos, poor communication, Little Understanding of or Commitment to SCM Principles, Fear of Relinquishing Control Different Goals and Objectives Inadequate, Information Systems, a Short-Term "Wall Street" Focus on Outcomes, Involvement in Too Many Supply Chains. (Barriers to Effective Supply Chain Relationships)
If we discuss supply chain management enablers they are many thing to discuss, but the most basic enablers need to be in place if supply chain optimization initiatives are to succeed are-Organizational Infrastructure, Technology, Straregic Alliance, Human Resource Partnership. These enablers have to be successfully deployed in the organization to improve performance of supply chain Drivers like-Inventory, Transportation, Facilities and information. The Wal-Mart is largest retailer in the world, because they have best supply chain operator of all times. In case study of (Wal-Mart's Supply Chain Management Practices (B): Using IT/Internet to Manage the Supply Chain) is discusses about internet enable technologies enhance the supply chain including procurement, warehouse, inventory management and demand forecasting.
What are the driving forces of the outstanding supply chain performance of Wal-Mart;
Wal-Mart invested heavily in IT and communication system.Wal-mart using RFID (see RFID chip below) (How RFID can help optimize supply chain management) which is replace by bar-coding to manage its inventories and they also highly invested in retail link where track order and find the pricing (http://retaillink.wal-mart.com /). By making efficient use of technology in all operation Wal-Mart helpfully provides uninterrupted service to its client’s stock holders and trading partners. Wal-Mart easy to mange own stock and reducing pack size, recently launched a design challenge to its consumer electronic suppliers and HP won the challenge now the company can ship three laptop in one box now they can save cash on packaging.( HP Pavilion Packaging).
Wal-Mart stores prefer data accuracy scorecard with suppliers, which allow access to monitor product data and advised don’t use Global Data Synchronization Network (GDSN), supplier should select a data pool and provide Wal-Mart with a GLN (Global location number).
(Wal-Mart to Use Data Accuracy Scorecard with Suppliers)
By using cross docking system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centres and stores and hub and spoke distribution system was fuelled by cross-docking. (Wal-Mart Case Study and History)
What is the current situation of Wal-Mart’s supply chain?
The situation of Wal-Mart supply chain is very superior.Wal-Mart has been a pioneer in SCM they are very good to understand his supplier and customer need and also the coordination and implementation of supply chain is very synchronic. In recent news Wal-Mart going to cut billions of dollars of cost from its supply chain by it’s combining its store purchase across national frontiers. Wal-Mart constantly seeing an opportunity to enhance the effectiveness of their supply chain. (Jonathan Birchall in New York)
Wal-Mart plans to leverage to get volumes for global distribution to its stores, slightly than a current country-by-country basis approach.Mal-Mart is moving to more direct procurement will be will provide well establish centralization of sourcing operation. Castro-Wright mention Wal-Mart has already established four global merchandising procurement centres for general goods and clothing and general goods. They are also planning to shift to global-wide direct purchasing of fresh fruit and vegetables, starting with North America.Wal-Mart not preferring working with import companies and agents.( Global Supply Chain: Wal-Mart to Centralize Global Sourcing, Reduce Use of Middlemen)
Wal-Mart Supply Chain
Wal-Mart is going for green supply chain; the 90% of the emission comes from supply chain operation. (Wal-Mart Promises a Greener Supply Chain)
Wal-Mart Supply Chain Operations Flow
Can Wal-Mart’s supply chain model be copied in other countries or other retailers? Why?
Can Wal-Mart’s supply chain model last forever? Any risks you could foresee?
There is no doubt Wal-Mart having very good and efficient supply chain, tremendous strength in high-performance SCM and SCM is backbone of many services operations. It main reason people think how Wal-Mart offer quality of products at low price. Wal-Mart has been a pioneer in supply chain management.Wal-Mart has many distribution centres and its supply chain establish superior connection between supplier of clothoes, paper products and Wal-Mart retail stores to reduce the inventory cost. As far as we know Mr. Castro-Wright has estimated the direct purchasing could reduce by 5-15% across the supply chain within 5 years and potential savings of $4bn-$12bn and Wal-Mart already establish four global merchandising centres and they have plan by the end of year going purchase general goods and for licensed Disney character clothing.Wal-Mart is also preparation to apply its new tactic in that arena. They are also shifting direct purchasing of its vegetables and fresh fruits for its stores in the USA, Mexico and Canada, after getting a result of initial pilot test with apples which reflect 10% fall down in purchasing cost.( Wal-Mart takes aim at supply chain cost).
After this test Wal-Mart expand this programme with other categories including frozen food, seafood and dry packaged groceries. The direct purchasing help lower acquisition cost and its help company to improve the security and quality of the food it supply its shoppers.
Therefore it can accomplish after analysis of supply chain both internal and external aspect. It all is done by coordination of information technology which enable greater purchasing capabilities.
Due to the complicated level to which Wal-Mart has build its architectures, it has a greater and appropriate way to implement the strategies and programs set up the supply chains, as well as prompt the innovation in the improvement of new initiatives.
However considering the entire factor the overall risk of global-level procurement, adherence to government inspection standards for vegetables and fruits, risk related to consistency of quality and response processes in the event of a product recall.Wal-Mart have consider his primary risk as the primary consumer and distributor of freight.
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