Six Key Elements In Supply Chain Management
Supply chain is a series of processes concerning about the moving of goods. The process starts from the customer order. The goods will pass the stages of raw materials stage, production, supply and finally the distribution stage of the product to the customer. From managing those stages, supply management arises because supply chain management is all about managing the chain of processes.
But one thing that should be taken into consideration is that, in order to have a successful management of this supply chain, there should be a coordination of this chain as quickly as possible but still the product must still have high quality to meet the expectation of the customer and the cost is still low. Because of globalization, supply chains players and manufacturers are in need to collaborate and integrate to ensure high degree of control.
According to Peter O’Brien, a Senior Vice President of DHL Logistics that is based in Singapore, the market is moving towards collaboration style which requires supply chains to have a direct link from emerging economies to developed countries because the supply markets and demand markets is evolving so fast. In there, technology, particularly the Internet, plays a major role because the proliferation of the Internet, the flow of information became nearly instantaneous.
O’Brien also said that the biggest challenge of this booming industry in the next decade is the willingness to adapt business models to the changing marketplace. Though globalization is the cause of the increase of supply chain risk, it is also a big help to minimize risk. Using global sourcing, allows finding safer site for the company, tap into educated overseas workers and help setting up production centers close to where the raw materials are gathered.
The key to success of this kind of business is to bear in mind that customer needs and satisfaction are the very reason why the company is existing. So, supply chains have paramount care about the customers need and satisfaction because that is main the function of their business—providing seamless solution from potential design through series of processes and finally, to the deliver the product to the customer. To attain that goal, the supply chain management should realize that the success is in the six key elements.
The six key elements of supply chain are production, supply, inventory, location, transportation and information. The execution of these key elements have an important bearing to the on the outcome of supply chain analysis process. Production must take into consideration what and how many products that are needed to produce. It also focuses on when to schedule the workloads, how to maintain the equipment, and how to meet immediate client or market demands.
It involves strategic decisions that must focus on capacity, quality and volume of goods, keeping in mind that the goal of the company is to meet the demand and satisfaction of the customer. Supply involves strategic decisions wherein the company must determine whether they can provide excellent performance of the manufacture with the thought in mind that their facilities are capable of producing in economic and efficient ways. But if the company cannot meet the excellent performance then they will have another alternative for it. It is called outsourcing.
By using outsourcing as an alternative, what the companies should do is to carefully choose suppliers of raw materials based on their developing velocity, quality and flexibility that to ensure high quality while maintaining low cost levels. Inventory must determine correct levels of supplies at order and reorder points because this is critical to the day to day operation of the company. The company should do this to keep the customer satisfaction high. In selecting a location, the company must consider the fact that the location decisions depend on market demands and determination of the customer satisfaction.
The production plants, distribution and stocking facilities should be placed in prime location to where the market is served. It is practical that the location of the production and stocking facilities to be near to the consumer as close as possible. If the industries’ components are lightweight then it is practical that the location is near to the end-user but if it is companies of heavier facilities then the plants should consider placing in as close as possible to the sources of raw materials.
Those were few to consider in selecting a location. Other aspects are the consideration of tax and tariff issues. Transportation, on the other hand, involves critical strategic decisions so that there is great assurance that goods are distributed smoothly without risking the quality of products. The company should bear in mind that the 30% of the cost of the product is encompassed by the cost in transportation. Therefore, the consideration of the mode of transportation to be used is very important.
Last but not the least, obtaining information all through out the chain is required to have a speed exchange of transactions and communication because by having so, there will be an effective supply chain management. The effectiveness of supply chain management strategy depends on good global communications, enterprise resource planning, account management software and product configurations. Supply chain management is a new means of competing globally if it is just implemented properly. The six key elements in this kind of business are good to remember in competing with the emergence of huge globalization.
Thus, in this supply chain management that is discussed in this paper, globalization, indeed, is having impacts on all kinds of industry not just in supply chain management.
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