Logistics supply chain management is one of the most contemporary and challenging concept in the present business community. Because of increasing global demand of business; transportation, procurement, manufacturing, distribution activities increased enormously. Now a day, major firms are focusing on SCM to minimize cost and constantly trying to develop new progressive technique to meet consumer demand to accomplish competitive advantage.
2 Meaning of Supply Chain Management:
To put it briefly, supply chain management means, right product at the perfect place on the perfect time on the right measure as well as at the correct quantity. For example, inside a supermarket, if the consumer found in a product shelves, there is tag for that product but no product in shelves; what you think? Yes, that is because of poor handling of SCM. More precisely, SCM will be the handling 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 very important?
As global competitions are increasing customer have different choices & has to satisfy demands. For example, if there are interest in umbrella in rainy season and if you asked supplier to provide 20,000 umbrellas in summer and supposed to receive at the outset of rainy season; what exactly do think could possibly happened?
Based on this scenario, say for instance, supplier response lately after 2 weeks, slowly starting procurement and then starting production and supply the goods at the end of rainy season. As a result, in this case the buyer will face tremendous losses.
Let’s imagine how can, we change our scenario having an effective strategy: take into account the order of umbrella was given at the end of spring to provide at the end of summer. Supplier response precisely, starting from procurement to distribution utmost efficiently and transported through freight within one week before ending summer. The delivery was on time and arrive within 30th days in summer. The purchaser is very happy to receive items on time and this allows the buyer to distribute products through distribution channel and, using the right forecasted of demand, buyer captures the current market at the perfect time and earning money.
In past manufacturers were called the drivers from the supply chain as they were scrambling to satisfy customer demands at rapid pace but now customer is referred to as the driving shots in a lasting competitive advantage. To satisfy the consumer demand accordingly, companies are shifting to customer oriented strategy (a bright example could be ‘Dell computer’). Hence, to accomplish competitive advantage in the market, it’s necessary to provide you with the product in the peak time.
4 Key Drivers of Logistics Supply Chain Management:
From the analysis different journal article, textbook, web research we found the key drivers are differ in according to different perspective, like 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 affects to meet the customer demand in market. Thus, companies are facing huge challenges to meet the criteria globally. Through the product barriers are eliminated, no products are now considering domestic products but as a result of globalization forces companies have a tendency to change policy and strategy regularly. Besides, with all the benefits from globalization now, foreign investor should put money into several countries which forces local companies to improve quality of existing items that create huge challenges in procurement, manufacturing, transportation and distribution activities for that companies.
For example, a company can produce a product in the US, manufacture in China and then sell in worldwide, i.e. Apple. This makes an intricate and challenging activities for company. Thus, in order to maintain global demand Apple makes strategic choice 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 take features of capturing large market. This strategy, allows Apple to become number ONE innovative company on earth.
Creating sustainable chain includes a major concern for companies. Constant variable pressure from regulations, geographic in nature, social-economic impact, international policies and principles in general is complex for managing SCM.
For example, green environment (i.e. carbon emission); local government are always imposing regulations which affect on the manufacturer. As an example, production and manufacturing in developed countries like in Europe is huge challenge as due to strict rules and policies of environmental issues can compare to underdevelop countries as with Asia. For instance, in automobile industry producing vehicles is challenging due to environmental issues in numerous 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 the primary step of towards of creating strategic network. However, as a result of geographical distance and expense, companies often couldn’t able to cope up with customer expectation.
4.3.2 b) Production: Cost fluctuation from production levels are critical problem for strategic decision, such as what product to generate, which plant to allocate and what supplies to get for production.
4.3.3 c) Inventory: Inventory cost varies at different level starting from raw materials to finished goods. Expense is also associated in buffer stock, safety stock or perhaps times of inventory in hands along with 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 think about distribution channels about air, ship and road. Air shipment is fast, reliable but expensive while sea shipment is chap but time-consuming.
Clients are by far the most unpredictable variables to find out demand. Frequent changes of demand, new expectation, changing approach of existing product, influential behaviour attitude towards goods are all determine to develop a customer-product innovation strategy. For instance, Apples starts it business around the bases of computers but after understanding demand of consumer, they launched iPhone, iPad, iPod as means of innovations strategy which satisfy customer however, not merely makes the customer delight but introducing facilities like ITunes, music, software application gradually capture the market the whole market.
The example here supplies a key learning tool ‘how the business understand its customer to accomplish competitive advantage’ making us to believe what strategy they are following. In Apple strategy most of the iPhone and iPad items (i.e. parts) are outsourcing. More precisely speaking, only a few components are created by Apple, hardware is supplied by contract manufacturer and software is supplied by an incredible number of software developer to build various applications for that devices which minimize the cost.
Supplier’s motivation is essential for quality, cost and delivery expectations of producing product with value as they have greater influential part of supplying item. For example, Dell’s direct strategy requires processing orders direct from customer. Dell’s pull tactic to build computers o customer’s specifications and deliver within time. To back up this model, Dell asked suppliers to keep inventories within a quarter-hour of the manufacturing locations. Nearly all products are made to order. Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. That means xqrcrh is almost no inventory of parts or products in the factory which happen only because of healthy relationship with suppliers.
With the advantage of technology, customer are becoming more technological oriented focusing on online trading, online shipping, online payment, online information, online virtual chatting, and so on. This technological process has a greater impact on customers and now per day clients are constantly willing to get more information, answers, regarding their choice, preferences. Dell’s could be an ideal example, how technology effect on business and increase revenue. The success of Dell’s direct sells strategy depends mostly on continuous growth and development of technological aspect as the customer willing to become a little more connected, assist these to develop cost effective quality product strategy.
Transport system is the most essential economic activity amongst the components of business logistics systems. Around one third to two thirds in the expenses of enterprises logistics expenses are used on transportation. Beside good transportation is challenging issue to offer product at perfect time. Thus, to permit flow of goods from one destination to a different as well as ensure punctually delivery; companies must understand the correct technique of supply chain. However, unorganized transportation system, labour force, policies, rules, uncategorized rooting system is a big hindrance for supply chain solution. If there is suitable transportation network, delivery from the product towards the market not ensured supply chain activities will likely be in danger.