Elements of Supply Chain Management

Here we expect to discuss the following areas in this post. 

Elements of supply chain management 

Warehousing 

Warehouse management systems ( WMS ) 

Inventory management 

Physical distribution and logistics systems 

Supply chain information systems 

Supply chain performance management

Elements of supply chain management 

The supply chain is the network of organizations involved in the different processes and activities that convert raw materials into finished goods and services to produce value for the end consumer. Supply chain management is concerned with managing those parts of the supply chain over which an organization has influence or control. The two parts of the supply chain over which a business organization has most control are : 

Its relationships with its suppliers 

The interface with suppliers: inward logistics and stores management 

Its relations with customers 

The interface with customers: warehouse management and outward logistics 

A supply chain flows from raw materials producers to the customers for the end products, and most business organizations (except for retailing organizations) are somewhere in the middle of the chain. 

The term ' upstream activities in a supply chain mean the activities of organizations earlier in the supply chain. A company's s suppliers are " upstream ' in the supply chain.

Downstream activities are the activities that occur later in the supply chain, ending with the sale of goods to the end consumer. A company ' s customers are ' downstream ' in the supply chain. 

Creating value in the supply chain 

Value is created in any of the following ways : 

• Cutting costs 
• Persuading customers to pay a higher price for products 
• Selling more products 
• Selling a more profitable mix of products 

Creating value through the supply chain can be achieved in the following ways : 

• Responsiveness 
• Reliability 
• Relationships Management of efficiency in logistics operations 

Responsiveness 

Companies must be able to supply their customers quickly. Customers may expect to receive products as soon as they want to buy them, or at least within a particular time after placing an order. 
Responding quickly to customer orders creates value because customers are more likely to buy from companies that can supply them immediately, or faster. 
Responsiveness means having goods in the warehouse available to supply to customers on-demand, or being able to fulfill a customer ' s order promptly. 
To meet customers ' demand for goods, a company needs the materials and components from its own suppliers. Responsiveness, therefore, also means having a sufficient amount of material items in-store to meet production demand or being able to obtain materials promptly from customers. 

Reliability

 Deliveries through the supply chain must be reliable in terms of timeliness, quality, and quantity. Reliability depends to some extent on responsiveness, but the value is created when customers can rely on a company to deliver the right amount of goods, of the right quality, and at the time when they are expected. For example, value is created in service for delivering parcels by promising a delivery time and meeting the promise. Reliability is also improved by transparency in the supply chain, so that upstream firms can see orders coming from their customers and can monitor deliveries coming from downstream suppliers. 

Relationships 

The need for responsiveness and reliability means that a company can establish strong relationships of trust and mutual understanding with its suppliers and its customers. A supply chain can be seen as a network based on collaboration and common interest. Companies can work with the suppliers to find ways of improving responsiveness to customers and improving the reliability of supply. 

Operational efficiencies 

Management can also create value by improving the efficiency of stores and warehouse operations. Minimizing inventory levels, without running out of inventory when needed, reduces the investment in inventory, and so reduces financing costs. Investment in better warehousing equipment and shelving may enable a company to use its warehouse space more efficiently, for example, by stacking items higher. Better use of space could result in lower accommodation costs. Companies may try to increase value by obtaining lower prices from suppliers. However, a risk with this buying strategy is that a relationship of trust is difficult to establish when the customer is continually demanding lower prices: and efficient buying might not create a sustainable competitive advantage. 

Creating a competitive advantage in the supply chain 

The previous section explained how value can be created through supply chain management. But does supply chain management simply create a threshold competence, using threshold resources, or can supply chain management be used to create a core competency and competitive advantage? The answer to this question is that this will depend on the circumstances.

Methods of improving the supply chain 

There are different ways of improving the supply chain. A company ' s ability to use these methods of supply chain management will depend on its circumstances. 

Reduce the number of Suppliers 

Suppliers who are not responsive or reliable may be suppliers " dropped', and reliable suppliers used more extensively. Using lewer suppliers should reduce administration costs in the buying department. It may also allow a company to make more use of shared IT systems with suppliers. Having fewer key suppliers should also improve the opportunities for developing strong relationships with them.

Reduce the number of customers

In some cases, this may improve supply chain management by allowing a company to focus on customers who are more profitable and provide more value. Coordinate production , warehousing and sales , and marketing Supplier involvement in product development and component design If a company is planning a marketing campaign for a product , management should make sure that a sufficient amount of the product is held in the warehouse or can be produced quickly in order to meet the expected increase in sales demand .

Supplier involvement in product development and component design

For companies that develop new products, the value can be created by involving key suppliers in the product design. Suppliers may be able to suggest ways of producing materials or components more cheaply without loss of quality or may be able to work with the company on ways of developing improved components.

Below areas will be discussed in the coming posts series,

Warehousing 

Warehouse management systems ( WMS ) 

Inventory management 

Physical distribution and logistics systems 

Supply chain information systems 

Supply chain performance management

To be continued...