Supply Chain Management In Todays Business Climate Business Essay



Todays business climate has rapidly changed and has become more competitive as ever in nature. In creating the competitive edge, companies need to divert its resources to focus on what they do best and outsource the process and task that is not important to the overall objective of the company. SCM (Supply Chain Management) has allowed company to rethink their entire operation and restructure it so that they can focus on its core competencies and outsource processes that are not within the core competencies of the company.

With this opportunity, the student has explained several topics which related to the Supply Chain Management.

The supply challenge

The fast-moving, short life cycle characteristics of consumer goods products make for a very complex supply chain. No matter how complex the manufacturing process, the foremost supply chain challenge is developing a good prediction of customer demand, that is, knowing what customers are going to buy, how much they will buy, and where and when they will buy it. The second challenge, assuming the company first has a good demand plan, is how to optimally manufacture the right product at the right time, and how to optimally get the products to the proper distribution point to meet customer service requirements-while always considering cost.

Creating a demand-driven supply chain

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To support a demand-driven supply chain, consumer goods companies must employ performance-driven supply chain practices, such as continuous business monitoring and proactive alert notification, which give them complete global visibility across their supply networks to adapt to changes in demand and adjust accordingly based on real-time insight into worldwide operations (Cousins, et al. 2008).

Using supply chain technology to reduce operating expenses

Supply chain technology helps consumer goods companies reduce inventory investments while maintaining or improving customer service levels. Using supply chain applications, manufacturers can invest in inventory that has the potential to contribute greater profitability while meeting customer expectations. For example, companies can compare the cost of 98 per cent service levels to 97 per cent, or see the impact of leveraging time-phase inventory policies to deliver 99 per cent service levels during peak seasons versus 97 per cent during slower periods (Cousins, et al. 2008).

The make-buy challenge

As a manager in a company, he/she has to distinguish and design his/her company's fulfillment supply chain and its technology supply chain. The manager should use a combined understanding of business cycle dynamics, value chain structural dynamics and corporate strategy dynamics to design a robust supply chain strategy.

In detail, a manager has to know if a company does too much outsource may lose its competitive advantage among the market. Company has to build a sourcing strategy tree to understand the position of each supplier, and then integrate make-buy decisions with supplier relations. When making make-buy decision, company should not focus merely on the cost, quality and time implications of the decision.

Sourcing strategies and supply chain configurations

Sourcing strategies

If company's sourcing strategy is to deliver a breakthrough result in terms of cost reduction and service improvement, it is vital that it accurately define what it is that its strategy aims to source. This is done using a Business Requirements Definition (BRD).

In addition, company's sourcing strategy will not sit in isolation - there will be a number of groups of people who have an interest in the outcome. The Business Requirements Definition sets out what company's sourcing strategy needs to deliver if all stakeholders are to be satisfied. It is a structured description of what you need to source from supply markets and covers the full range of stakeholder needs.

These requirements are critical to a successful sourcing outcome because they are a key input to a number of steps in the sourcing process. These include:

Deciding on the evaluation criteria to be sued in selecting the preferred supplier

Testing your sourcing options so that the one that most closely meets your organization's overall needs is chosen

Developing the most relevant performance measures to include in the contract

Deciding whether circumstances have changed so much that the sourcing strategy needs to be re-visited

Supply chain configurations

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Supply chain configuration is a high-level supply chain management problem, which either completely or partially incorporates some of the specific supply chain management problems. Problems that are relevant to supply chain configuration are as follows:

a) Network design. It is the core sub problem of the supply chain configuration problem, thus all its aspects are relevant.

b) Sales and distribution. Individual ordering and marketing activities do not contribute to identifying supply chain configuration problems.

c) Logistics design. Deciding on the inventory and distribution approach, such as vendor-managed inventory, cross docking, third party logistics, and associated transportation mode, capacity, and main routes to be adopted.

Forecasting and demand planning interacts with configuration decision making by providing demand data or forecasting algorithms, and there are usually no specific forecasting components within configuration decision making models. Therefore, demand planning and forecasting can be perceived as a problem, which is not necessarily an area of expertise for a supply chain configuration analyst, even though configuration problem decision making would not be possible without demand data.

Strategic supplier selection

Strategic supplier selection processes require consideration of a number of factors beyond those used in operational decisions (Christopher, M. 2005). With increased emphasis on manufacturing and organizational philosophies such as Just in Time (JIT) and total quality management (TQM), and the growing importance of supply chain management concepts, the need for considering supplier relationships from a strategic perspective has become even more apparent.

While supplier selection is one of the most fundamental and important decisions that a buyer makes, it may also be one of the most difficult and critical (Christopher, M. 2005). This is mainly due to the increased levels of complexity involved in considering various supplier performance and relationship factors. For instance, a supplier could be evaluated and screened technically based on a number of factors that include:

Emphasis on quality at the source

Design competency

Process capability

Operators able to chart problems and process issues

Hours of operator training in total quality control (TQC)/JIT

Buyers must analyze and document the importance of several of the aforementioned factors, converting instinctive qualitative indicators to concise empirical measures.

Supplier development

Growing competition within the global economy has for many years been forcing enterprises to reduce their costs. However, traditional approaches have been limited to eliminating wastage within an enterprise. Another way has now opened up, through outsourcing. Cooperation with subcontractors can make them more efficient and thus enable goods to be purchased at lower prices.

Supplier development is a broad concept aimed at strengthening the performance of subcontracting firms not only by enabling them to acquire the skills and capacities required of them by the main contracting (or client) enterprise but also by raising their awareness and assisting them in reducing their costs (Mangan, et al. 2008).

Aligning supply with corporate strategy

The traditional commercial business goal put most simply is "to make money for our owners". How businesses go about doing that is where they differ. Larger companies will have a Vision and/or Mission statement and one or more goals. These define in what market(s) the organization will operate in and how it will go about differentiating itself from its competitors. They also help the organization priorities its limited resources.

There are many dimensions in which a company may chose to compete depending upon what they perceive to be the factors most important to the customer base or market they are targeting. It is not possible to excel at all of them at the same time. Such strategies require quite different management and investment approaches in provision of resources, skills, capacity and planning. These need to be matched by the choice of external resources which is the responsibility of procurement.

Performance management

Performance management is the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of agency mission and goals.

Employee performance management includes:

planning work and setting expectations,

continually monitoring performance,

developing the capacity to perform,

In effective organizations, managers and employees have been practicing good performance management naturally all their lives, executing each key component process well. High standards are set, but care is also taken to develop the skills needed to reach them. Formal and informal rewards are used to recognize the behavior and results that accomplish the mission. All five component processes working together and supporting each other achieve natural, effective performance management.


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With the above analysis, it can be seen that Supply Chain Management has a very significant position on company's development.

Para 2 and 3 has explained the challenges on supply and make-buy. Therefore making the right decision is also important at this moment.

The following Paragraphs have given the clear explanation about how to deal with the problems which are relating to the supply chain management.

As we can see that dealing with supply chain management probably is very important for a company's development.

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