Logistics supply chain management is one of the most contemporary and challenging concept in today’s corporate environment. Due to increasing global need for business; transportation, purchasing, manufacturing, distribution activities increased enormously. Now a day, major companies are focusing on SCM to reduce cost and constantly seeking to develop new progressive strategy to meet consumer demand to achieve competitive benefit.
2 Concept of Supply Chain Management:
In short, supply chain management means, right product at the perfect place on the right time at the right measure and at the best quantity. For instance, inside a supermarket, when the consumer seen in a product shelves, there is tag for that product but no product in shelves; what you think? Yes, that is because of poor control over SCM. More precisely, SCM is definitely the management of inbound and outbound logistics process to integrate from procurement, suppliers, manufacturers, warehouse, distributors, transportation, and store to be able to meet consumer demands.
3 Why Supply Chain Management is essential?
As global competitions are increasing customer have different choices & must satisfy demands. As an example, if you will find interest in umbrella in rainy season and in case you asked supplier to provide 20,000 umbrellas in summer and supposed to receive at the beginning of rainy season; exactly what do think would possibly happened?
According to this scenario, say for instance, supplier response lately after 2 weeks, slowly starting procurement and then starting production and provide the goods at the conclusion of rainy season. As a result, in cases like this the buyer will face tremendous losses.
Let’s imagine just how can, we change our scenario with the effective strategy: think about the order of umbrella was given at the end of spring to deliver after summer. Supplier response precisely, beginning with procurement to distribution utmost efficiently and transported through freight within one week before ending summer. The delivery was punctually and arrive within 30th days in summer. The buyer is happy to receive items on time which allows the purchaser to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the marketplace on the perfect time and making money.
In past manufacturers were known as the drivers of the supply chain since they were scrambling to meet customer demands at rapid pace however customer is known as the driving shots in a long term competitive advantage. To meet the consumer demand accordingly, companies are shifting to customer oriented strategy (a bright example would be ‘Dell computer’). Hence, to achieve competitive advantage available in the market, it’s required to provide the product on the peak time.
4 Key Drivers of Logistics Supply Chain Management:
From the analysis different journal article, textbook, web research we found the real key drivers are differ in in accordance with 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 of affects to satisfy the consumer demand in market. Thus, companies are facing huge challenges to meet the requirements globally. With the product barriers are eliminated, no goods are now considering domestic products but because of globalization forces companies tend to change policy and strategy regularly. Besides, using the advantages of globalization now, foreign investor ought to spend money on several countries which forces local companies to enhance quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for your companies.
As an example, an organization can develop a product in the US, manufacture in China then sell in worldwide, i.e. Apple. As a result a complicated and challenging activities for company. Thus, in order to maintain global demand Apple makes strategic decision 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 company to consider benefits of capturing large market. This tactic, allows Apple to be number ONE innovative company on the planet.
Creating sustainable chain includes a major concern for companies. Constant variable pressure from regulations, geographic in general, social-economic impact, international policies and principles in general is complex for managing SCM.
As an example, green environment (i.e. carbon emission); local government are always imposing regulations which impact on the producer. As an example, production and manufacturing in western world as with Europe is huge challenge as due to strict rules and policies of environmental issues compare to underdevelop countries as in Asia. As an example, in automobile industry producing vehicles is challenging as a result of environmental issues in various countries.
You will find four major decision areas in price awareness:
4.3.1 a) Location: Convenient feasible location with availability resources including all facilities is definitely the primary step of towards of making strategic network. However, because of geographical distance and expense, companies often couldn’t in a position 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 produce, which plant to allocate and what supplies to obtain for production.
4.3.3 c) Inventory: Inventory cost varies at different level beginning with raw materials to finished goods. Price is also associated in buffer stock, safety stock or even days of inventory in hands in addition to price increases during the periods of inflation affects.
4.3.4 d) Transportation: 30 percent of logistics cost associate with transportation which makes the companies to take into account distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is chap but time consuming.
Consumers are 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 develop a consumer-product innovation strategy. For example, Apples starts it business on the bases of computers but after understanding need for consumer, they launched iPhone, iPad, iPod as method of innovations strategy which satisfy customer although not merely makes the customer delight but introducing facilities like ITunes, music, software application gradually capture the marketplace the entire market.
The example here provides a key learning tool ‘how the organization understand its customer to attain competitive advantage’ which makes us to think what strategy these are following. In Apple strategy the majority of the iPhone and iPad items (i.e. parts) are outsourcing. More precisely speaking, not many components are made by Apple, hardware comes by contract manufacturer and software comes by an incredible number of software developer to construct various applications for the devices which minimize the cost.
Supplier’s motivation is essential for quality, cost and delivery expectations of producing product with value because they have greater influential aspect of supplying item. As an 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 back up this model, Dell asked suppliers to keep inventories within fifteen minutes in the manufacturing locations. Virtually all products are made to order. Every a couple of hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. Which means xqrcrh is almost no inventory of parts or products in the factory which happen only because of healthy relationship with suppliers.
With the benefit of technology, customer are now becoming more technological oriented focusing on online trading, online shipping, online payment, online information, online virtual chatting, and so on. This technological process includes a greater influence on customers and today a day clients are constantly willing to obtain more information, answers, with regards to their choice, preferences. Dell’s happens to be an ideal example, how technology influence on business and increase revenue. The success of Dell’s direct sells strategy depends mostly on continuous development of technological aspect since the customer willing to be a little more connected, assist these to develop cost effective quality product strategy.
Transport system is the most essential economic activity among the components of business logistics systems. Around one third to two thirds of the expenses of enterprises logistics costs 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 as well as ensure on time delivery; companies needs to understand the correct technique of supply chain. However, unorganized transportation system, labour force, policies, laws and regulations, uncategorized rooting system is a huge hindrance for supply chain solution. If there is suitable transportation network, delivery in the product for the market not ensured supply chain activities will be in danger.