Supply Chain Management Analysis and their Constituents

Supply Chain Management Analysis is The biggest challenge in front of business organizations is to find out the ways for interesting their supply chain so as to enhance the effectiveness of the logistics activities. In the today’s modernized world, the real competition is not among the individual organisations but among different supply chains. Thus the success of a supply chain lies in its ability to combine three business activities, viz, procurement, production and distribution. It involves integrating and managing the sub-components associated with functional areas of supply chain. These functional areas are discussed below.

1. Procurement: The total cost incurred on supply chain comes mainly from the procurement. Following are the factors which affect the cost incurred on procurement.

  1. The manner in which procurement decisions are taken,
  2. The procedure and methods involved in the process of procurement,
  3. The credibility of the business firm,
  4. Relationship with various suppliers,
  5. Knowledge of the market or market intelligence.

The expenses on procurement can be lowered by establishing enduring relationships with the suppliers, where they are considered to be a part of firm’s production facility. Such partnership with the supplier is based on the sharing of resources and profits or other benefits in the long run. The primary action in this direction is reducing the quantity of suppliers by replacing them with quality suppliers, who are willing to collaborate in compliance with the firm’s policies and can effectively fulfill the needs of the supply chain. This collaboration evolves out the principles of mutual understanding, skills, and sharing of advantages, and would further result in bringing down the expenses and enhancing the work efficiencies of both the parties.

Planning for the required material is one of the crucial parts of the procurement process. An integrated supply chain would have its influence on each and every element. Thus, collaborative systems would include covering the complete inventory information required in the supply chain. An efficient flow of goods under a supply chain can be ensured by establishing effective coordination and communication networks with the suppliers. The schedule of sending the consignments is decided as per the needs of the organization. The logistics operation is given due consideration to avoid any unforeseen circumstances so that there is no room for inconsistency or delay while the goods are being delivered.

2. Processing: In supply chain management, the main focus is on minimizing the large inventory costs incurred due to the production of goods more than their actual demands. It puts fewer efforts on minimizing production costs through economies of scale. This trend was quite visible previously when the bulk production decreased production costs and the market overflowed with inexpensive goods. The stress was on maintaining the quality of the goods which could be sold worldwide. As a result, the processed goods remained stored in big warehouses where they are left unused and unsold, as they were unable to meet the changing demands of the consumers.

3. Distribution: The distribution systems were traditionally involved in storage and transportation of processed goods only. But in the supply chain model, the primary function of the distribution process is to manage the demand, which means to supply right goods at the demand management is to identify the potential needs of the consumers and to fulfil such needs as per suitable customers service standards. Such needs of customers are fulfiled buy operating effective distribution system.