Supply Chain Definition
Objectives of Supply Chain management can be deeply understood after discussing the main concepts.
What is Supply Chain Management?
- Management of Supply chain mainly combines demand and supply networks. It focusses on the efficient working of every step involved in the entire supply chain meaning using various approaches and strategies.
- Every link in the chain tries to minimize the cost and improve long-run performance by eradicating useless expenses, handling and movements.
- The major objectives of supply chain management are to relate and monitor distribution, production and transport of goods and services. Therefore, this can be followed by keeping a good hold on inventories, shipment, internal sales and productions.
- Also, this must be noted that supply chain management and supply chain event management are different, which talks about factors that interrupt and effective supply chain.
- Supply chain meaning further includes three types of flow in the objectives of supply chain management :
- Material flow
- Information flow
- Money flow
6. After discussing the types of flow, next comes to the components or elements that complete this flow.
- Long-term Decisions
- Lane Operation Decisions
- Choice and Mode of Carrier
- Dock Level Operations
- Sourcing and procurement
- Returns management
- Post-sales services
Advantages of supply chain management
When the target becomes customer satisfaction than objectives of supply chain management of the company plays a vital role. Firms are dependent on supply chain networks significantly.
Now, let’s understand the benefits provided by the supply chain which are explained as follows:
- Firstly, it improves business and productivity functions.
- Secondly, it increases inventory management keeping a healthy execution of stock in just-in-time.
- Manages better mechanism of delivery for services and products with minimized delay.
- Creates improvised customer relation and service.
- Minimizes indirect, direct, transportation and warehouse costs.
- Assist firms in coping with challenges regarding economic upheaval, globalization, related differences and expanding consumer expectations.
- Helps to achieve the target of distributing products to the right place in time.
Supply chain management forms a part of distribution and logistics while the actual work starts with product mix in marketing discussed in the topic product hierarchy example.
Objectives of Supply Chain Management
Looking for sources of cost and revenue
For marketing, there is only one source for revenue i.e consumers and customers. Proper management in the flow of products, services, information or funds needs to be implemented for a successful supply chain.
Maximize the value generated
Supply chain profitability refers to the difference between the cost paid by the customers and expenses incurred by the firm to supply that product. As a result, the higher the supply chain, the higher will be the value generated or the success of the organisation.
Improvement of cost quality
Other objectives of supply chain management are cost quality. Increased productivity, in turn, gives optimization of resources and balance.
Products being replenished whenever required
Also, objectives of supply chain management include replenishment which is termed as restoration of supply or stock to a former level. Therefore, a marketer can easily replenish the material whenever required.
With adequate supply chain, a distributor can provide products to the customer with greater speed.
Shortens the time to order
The next objectives of supply chain management are reduction in time which is required for fulfilling and ordering the demand of the customer.
Appropriate supply chain management helps to enhance the efficiency of supply chain network points.
The main objectives of supply chain management i.e to target customers demand gets delivered in time with low cost and high quality.
Being involved in supply chain management, the marketer gets an aid to be updated with the supply chain efficiency and dynamics.
The management between chains helps to maintain coordination and results in the world-class performance of the organisation.
Other objectives of supply chain management indicate the proper utilization or the optimization of post and pre-production inventory levels. ( Inventory is termed as outflow and inflow of the stock for production)
Also, it becomes difficult for the organisation to balance supply and demand. However, objectives of supply chain management signify fulfilling the demand of customers through valuable resources.
Managing the supply chain network results in improvised control mechanism and flexible planning.
Flow or the movement of the goods helps the companies to understand the macro and micro level of the supply chain which in turn provides a better understanding of business characteristics.
There is a relation between efficiency and efficacy of the objectives of supply chain management. SCM provides greater labour, space and equipment efficiency.
The objectives of supply chain management further reduce the company costs like fixed assets, manufacturing, transportation, inventories etc. Moreover, system-wide cost and service level (response time) also decreases.
The objectives of supply chain management moreover enable the top and middle-level managers to take apt decisions. Similarly, this can also be used as a stability strategy in strategic management as a competitive advantage.
When the intermediaries are used properly, then the objectives of supply chain management is achieved. This results in a regular distribution of goods by utilizing all resources.
Why SCM is important?
In today’s scenario, manufacturers and retailers are closely related to move to the circle for the replenishment of orders. As a result, they remain tuned for just in time stock to restore their shelves.
Moreover, since the relationship has widened, information from the supply chain gave an advantage to companies an analytic tool for better results. Few points are as follows:
Dynamically optimizing the price
Items that are seasonal or perishable are difficult to manage for which a supply chain strategy is important. Seasonal products like clothing need to be cleared during that duration or are sold at discounts to wind up the stock. Moreover, hotels or airlines with perishable and limited products have to behave dynamically that can improve margins using the objectives of supply chain management.
Figuring out problems before in time
In case the manufacturer faces a shortage of product as demanded by the customer, then in traditional methods, he might return unsatisfied. However, due to objectives of supply chain management, one can cope up with the needs of the buyer. This can either be done by restoration or by offering a substitute to make the customer happy.
A marketer allocates the resources to fulfil the forecasted sales, actual and promised orders. As a result, the objectives of supply chain management focus on confirming the delivery date which in turn reduces incorrectly filled orders.
Supply Chain Management Process
The procedure for objectives of supply chain management is followed to make the supply chain network cost-effective and efficient. As a result, it includes steps involved to manipulate raw materials into the final good. Following are the five basic components for the supply chain management process:
Firstly, the supply chain management process starts with planning level. The company need to build a strategy to know how the services and products will fulfil the demand of the customers. The planning mainly focusses on the maximization of profit. A set of metrics is planned for designing the products and managing the services by the company.
Secondly, the next step includes sourcing or developing. This step includes developing a relationship with suppliers for the production of the raw material. It counts not only finding trusted suppliers but also identifying various methods for delivery, shipping and payment.
Thirdly, the objectives of supply chain management are based on the production of products that are required by the customers. This stage involves designing, producing, testing, packaging and synchronization of the products.
The major duty of the manager becomes scheduling activities for the preparation of the delivery. This level is considered as the most intensive unit where each firm differentiates based on production output, quality levels and workers result.
Fourthly, there comes a delivery stage. Therefore, the final products are delivered to customers. This stage is mainly termed as logistics phase where customers order and planning of goods take place. Companies collaborate the receipt of orders, frame warehouse, pick carriers, and arrange an invoice system for payments.
Finally, for objectives of the supply management process is the return. Here the defective items get returned by the customer to the supplier. Therefore, customer queries and grievances are handled which results as a problematic section. The supply chain network must set a flexible section for handling the returns who have issues.
There can be instances where efficiency of inventories measures the efficiency of the supply chain. Briefly, it states that the supply chain maintains the efficiency of inventory reductions. Although inventory is considered as a liability, supply chain managers ensure that they are stored in the need for inventory. However, the unwritten law stays to keep inventory at a minimum level.
Moreover, inventory management is termed as a task since the managers keep inventories as low as possible(because of inventory investment). Furthermore, this is followed since the cost of holding the inventories can be high. This amount includes costs related to purchasing, acquiring and managing the inventory. As a result, inventory management becomes of utmost importance.