Supply Chain Management Operates At Three Levels Commerce Essay

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Supply chain management operates at three levels; strategic, tactical and operational. At the strategic level, company management makes high level strategic supply chain decisions that are relevant to whole organization. The decisions that are made with regards to the supply chain should reflect the overall corporate strategy that the organization is following.

The strategic supply chain processes that management has to decide upon will cover the breadth of the supply chain. These include product development, customers, manufacturing, vendors and logistics.

Product Development

Senior Management has to define a strategic direction when considering the products that the company should manufacture and offer to their customers. As product cycles mature or products sales decline, management has to make strategic decisions to develop and introduce new versions of existing products into the marketplace, rationalize the current product offering or whether develop a new range of products and services. These strategic decisions may include the need to acquire another company or sell existing businesses. However, when making these strategic product development decisions, the overall objectives of the firm should be the determining factor.


At the strategic level, a company has to identify the customers for its products and services. When company management makes strategic decisions on the products to manufacture, they need to then identify the key customer segments where company marketing and advertising will be targeted.


At the strategic level, manufacturing decisions define the manufacturing infrastructure and technology that is required. Based on high level forecasting and sales estimates, the company management has to make strategic decisions on how products will be manufactured. The decisions can require new manufacturing facilities to be built or to increase production at existing facilities. However, if the overall company objectives include moving manufacturing overseas, then the decisions may lean towards using subcontracting and third party logistics. As environmental issues influence corporate policy to a greater extent, this may influence strategic supply chain decisions with regards to manufacturing.


Company management has to decide on the strategic supply chain policies with regards to suppliers. Reducing the purchasing spends for a company can directly relate to an increase in profit and strategically there are a number of decisions that can be made to obtain that result. Leveraging the total company's purchases over many businesses can allow company management to select strategic global suppliers who offer the greatest discounts. But these decisions have to correspond with the overall company objectives. If a company has adopted policies on quality, then strategic decisions on suppliers will have to fall within the overall company objective.


As well as strategic decisions on manufacturing locations, the logistics function is main success of the supply chain. Order fulfillment is an important part of the supply chain and company management need to make strategic decisions on the logistics network. The design and operation of the network has a significant influence on the performance of the supply chain. Strategic decisions are required on warehouses, distribution centers which transportation modes should be used. If the overall company objectives identify the use of more third parties subcontracting, the company may strategically decide to use third party logistics companies in the supply chain.

Strategic decisions determine the overall direction of company's supply chain. They should be made in conjunction with the company's overall objectives and not biased towards any particular product or regional location. These high level decisions can be refined, as required, to the specific needs of the company at the lower levels which allow for tactical and operational supply chain decisions to be made.

Variable 2: Organizational Strategy

Firms strive for sustainable competitive advantage financial performance that consistently outperformers their industry peers. The world is so dynamic, with new products and new competitors raising seemingly overnight, that truly sustainable advantage might seem like impossibility. But there are winners and the Zara chain is one of them.


The mission is a broad statement of personal or business scope, purpose and operation that distinguishes from others. It serves to inform employees, friends, neighbors and agribusiness people about what's important to business. Mission statement is of significant importance of any company and is one which shows how your business operates in a real world.


As a mission statement represent actually what is, while a vision statement show of what and how businesses operate. It gives a clear picture of the future in which ways company works to create and what business will become. In order to develop and motivate a vision statement business people needs to be aligned with the core values of both, the individuals and the firm business and as well as be effectively communicated to and accepted by everyone involved in certain company.

Goal and Objective

Create the bite size pieces, the real map and manageable stepping stones to achieve the mission, make the vision a reality, and navigate the course we have set for our business or for ourselves. Goals are the bigger fuzzy things and objectivities are the smallest ones:






Are all step through the company achieves its goals. Written goals and objectivities provide motivation to achieve them and can then be used as a reminder to you and others. Clearly and specifically written the also eliminate confusion and misunderstanding.

Variable 3: Supply Chain Activities

Supply chain management plays a very important role within the companies. The supply chain generates the most of the costs of the company, due to the width and complexity of the function (manufacturing, where house, distribution). Any inefficiency can create tremendous negative impact of the company. On the other hand, good supply chain management can bring huge benefits and competitive advantage to the company.

In order to provide the product, the supply chain needs to perform the various activities that extend to different areas, from procurement to customer service.

Procurement: Activities related to the purchasing of all goods and services required by a specific company to operate their business.

Order processing: Functions needed to capture customers' orders, cash as order receipt, order picking and order shipment.

Demand and Supply Planning: Process of forecasting customer demand, actual sales and current inventory levels on stock.

Inventory Management: Expands through different activities in order to track stock levels - including forecasting, positioning of stock and the tracking of product age and availability.

Warehousing: Keeping of goods with an emphasis on moving product into through and out of warehouses in a timely and accurate manner.

Transportation: Movement of products from one destination to another. Transportation can involve different transport methods, depending on the business, market and infrastructure specifics.

Customer service: Includes all sales of after sales related activities that occur between the buyer and seller. These functions include order status, post-sale support etc.

All these processes within supply chain can be mapped to and associated with the majority of the five components of the supply chain (suppliers, manufacturers, distributors, retailers, and consumers). Still, for most, there are a few components that are more closely tied with that particular activity.

Variable 4: Supply Chain Design

Supply Chain Design (SCD) establishes the supply chain network architecture, manages sourcing decisions and ensures that the components are aligned with corporate and supply chain strategy, and that our supply chains are as efficient and effective as required.

There are several different Supply Demand Network designs such as:

Manufacturer storage with direct shipping

The product is shipped directly from the manufacturer to the end customer, by passing the retailer the one who takes the order and initiates the delivery request. This is referred to the drop shipping and all inventories are placed at the manufacturer. Information flows from the customer, by the retailer, to the manufacturer while the product is shipped from the manufacturer to customers.

Manufacturer storage with direct shipping and in-transit merge

Transit merge network combines pieces of the order coming from various locations so that the customer gets a single delivery.

Distributor storage with package carrier delivery

In this network inventor is not held by manufacture at the factories it's held via distributors or retailers in intermediate were house and package carriers are used to transport product from the intermediate location to the final customer.

Distributor storage with last mile delivery

Last mile delivery is referred to the distributor or retailer delivery the product to the customer's home instead of using a package carrier. Under this package, last mile delivery considers that the distributor ware house needs to be closer to the customer, increasing the number of ware houses needed.

Manufacturer / distributor storage with customer pickup

Inventories are stored at the manufacturer or distributor warehouses but customers place their orders online or by the phone and then come to designate pickup points to collect their orders. Thus then the orders are shipped from the storage site to the pickup points as required.

Retail storage with customer pickup

As retail stores the inventory is stored locally, customer can either walk into the retail store pr place an order online or via phone and then pick it up at the retail store.

Variable 5: Marketing

Marketing plays an increasingly important role in the process; it balances procurement by providing essential demand information and building the relationships that help improve the efficiency of supply chain operations.


A definition from the Council of Supply Chain Management Professionals highlights the integration of supply-and-demand management within and across companies. It stresses the importance of coordination and collaboration with channel partners such as suppliers, intermediaries and service providers. This increasingly blurs the lines between companies and suppliers. Marketing plays an important role in building the relationships between the parties through communication and support programs. That, in turn, helps to build a collegiate environment in which all parties interact and participate in business development programs that contribute to improved customer service.


In a collaborative relationship, supply chain partners contribute to high levels of customer satisfaction and help to make a company the preferred choice for customers. Marketing provides information on products and availability, prices, order tracking, incentives, marketing campaigns and sales information. This increases understanding of market demand and marketing initiatives, which in turn improves supply chain planning. By focusing partners' attention on customer requirements, marketing enables the supply chain to strengthen the company's competitive position and support the successful development of new products.


When supply chain partners have the right level of market awareness, they can deliver added value and play a proactive role in providing products and services. Marketing can design programs to help partners grow their own business and make it easier for members of the supply chain to work together. Business education programs help partners keep up with the latest developments and maintain their product and business skills. Courses cover issues such as management development, product marketing skills, industry knowledge and sales and marketing tools.


Marketing can help distribution partners benefit directly from the strength of a company brand. The brand differentiates a company from the competition when it communicates with potential customers. Marketing also can support resellers by driving business in their direction. This can be as simple as generating leads or running joint marketing campaigns. Reward programs encourage distribution partners to do more business with a company, while incentive programs can increase revenue for both parties.


Marketing provides an essential balance in supply chain management. It helps companies and their partners become more focused on customers rather than on the production process. By improving communications, support and collaboration, marketing helps increase supply chain efficiency and create a single extended enterprise with a strong competitive edge.

Variable 6: Sales

Order processing is related with three main components of the supply chain: manufacturers, distributors, and retailers. The retailers are placing orders, manufacturers and distributors work in collaboration with one another in order to fulfill these orders.

Order processing involves the following steps:

Customer is placing order

Order is received by manufacturer

Order is processed

Credit checked (credit department) and verified

Order is picked and loaded to truck

Order is shipped to the customer

Order is received by customer and added to the customer's inventory

The order cycle time is the time necessary for order to be fulfilled. Reducing the order cycle time for all order cycle steps can contribute to the effectiveness of the whole supply chain. A customer's order is the trigger for the whole process within the supply chain. Slow and inaccurate ordering processing can impact every segment of the supply chain and result in lost sales, revenue and eventually loss of customers.