An Analysis Of Supply Chain Management's Strategic Importance (SCM)

An Analysis Of Supply Chain Management's Strategic Importance (SCM) | 1 Introduction | In the modern corporate environment, logistics supply chain management is one of the most cutting-edge and difficult ideas.

The activities related to transportation, procurement, manufacturing, and distribution have greatly risen as a result of the rising global demand for business. Major businesses are now concentrating on SCM to cut costs and are continually working to develop new, creative tactics to meet consumer demand in order to gain a competitive advantage.

2 Supply chain management explained:

Supply chain management, in its simplest form, refers to placing the appropriate product in the appropriate location at the appropriate time in the proper quantity. What do you think, for instance, if a customer enters a supermarket and notices a product on the shelves, but there is only a tag? Yes, bad SCM management is to blame for this.

In order to meet consumer needs, SCM is more specifically the management of inbound and outgoing logistics activities to integrate from procurement, suppliers, manufacturers, warehouse, distributors, transportation, and store.

3 What Are the Benefits of Supply Chain Management?

Customers have more options and need to meet demands as global competition rises. What, for instance, would most likely occur if you ordered a supplier to supply 20,000 umbrellas in the summer and anticipated to receive them at the start of the rainy season? There is a need for umbrellas during the rainy season.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

This scenario says that, for instance, if a supplier's answer is delayed after two weeks, procurement will begin gradually, followed by manufacture and supply of the items after the conclusion of the rainy season. As a result, the buyer will suffer severe losses in this scenario.

Think of the umbrella order placed at the end of spring to be delivered at the end of summer as an example of how we might improve our scenario using an effective strategy. A week before the end of summer, the supplier responded quickly, efficiently, and accurately from the point of procurement to distribution.

Within the 30th day of the summer, the delivery was made on schedule.When items are delivered on time, the customer is pleased. This makes it possible for the customer to distribute goods through the distribution channel, and when demand is correctly projected, the customer successfully captures the market.

Customers are now referred to as the driving force in the supply chain, which is a long-term competitive advantage. Previously, manufacturers were regarded as the supply chain's drivers since they were rushing to meet customer demands. Companies are switching to a customer-oriented strategy to better meet client demand (a shining example would be "Dell computer"). Delivering the goods during the peak period is therefore vital to gain a competitive advantage in the market.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

4 Major Forces that Drive Logistics Supply Chain Management

We discovered that the primary drivers vary depending on several views, such as globalisation, sustainability, cost-awareness, customers, suppliers, technology, and transportation, by analysing various journal papers, textbooks, and online research.

(a) Globalisation 

The pressure from multinational brands, local competition, ongoing policy and regulatory changes, and all external forces (political, economic, sociocultural, technological, legal, and environmental) that have an impact on meeting market demand from consumers. Therefore, it is extremely difficult for businesses to match the demands of the world.

No longer are there any product barriers, yet because of the dynamics of globalisation, businesses nonetheless frequently modify their policies and strategies.

Additionally, as a result of the advantages of globalisation, foreign investors are now encouraged to invest in a number of nations. This encourages local businesses to raise the quality of their current products, which poses significant difficulties for the businesses in terms of procurement, manufacturing, transportation, and distribution.

For instance, a business, like Apple, may develop a product in the US, produce it in China, and market it globally. As a result, the company's activities become complicated and difficult. As a result, Apple makes strategic decisions to establish worldwide production and engineering infrastructure in California, Ireland, and Singapore in order to seize markets in the US, Europe, and Asia. This is done in order to maintain global demand.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

Apple's global approach enables the business to benefit from cornering a sizable market. This tactic enables Apple to surpass all other creative businesses worldwide.

(b) Sustainability 

Companies are very interested in building chains that are sustainable. It is difficult to manage SCM under constant varying demand from rules, geographic in nature, social-economic impact, and general international policies and principles.

For instance, local governments constantly impose rules that have an impact on the manufacturer in the green environment (i.e. carbon emission). For instance, production and manufacturing are far more difficult in industrialised nations like Europe than they are in poor nations like Asia because of the severe laws and regulations governing environmental issues.

For instance, the production of vehicles in the automotive industry is difficult due to environmental concerns in many nations.

(d) Cost Sensitivity

Cost awareness involves four main decision-making areas:

a) Site: The first stage in building a strategic network is to find a convenient, practical location with access to resources and all facilities. However, because of expense and distance, businesses frequently couldn't meet client expectations.

b) Production: Cost variations from production levels are important factors when making strategic decisions about what product to make, which facility to use, and what supplies to procure.

c) Inventory: The cost of inventory varies at several levels, starting with raw materials and ending with finished goods. Along with price increases during periods of inflationary effects, cost is also linked to buffer stocks, safety stocks, or even days of inventory on hand.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

d) Transportation: Companies must consider distribution channels such as air, sea, and road because transportation costs account for 30% of logistics costs. While shipping by sea is inexpensive but time-consuming, shipping by air is quick and reliable.

1) Clients:

The most unreliable factors in determining demand are consumers. A customer-product innovation strategy must take into account recurring shifts in demand, new expectations, evolving approaches to current products, and important behavioural attitudes regarding products.

As an illustration, Apple first built its business around computers, but after recognising consumer demand, the company introduced the iPhone, iPad, and iPod as part of an innovation strategy that not only delighted customers but also helped the company gradually take the entire market.

The example here offers a crucial teaching tool that prompts us to consider the organisation's approach by demonstrating "how the company understands its consumer to create competitive advantage." According to Apple strategy, the majority of the components for the iPhone and iPad are outsourced.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

More specifically, Apple creates a very small number of components, hardware is provided by contract manufacturers, and software is provided by millions of software developers to generate a variety of cost-effective applications for the devices.

2) Vendors:

Since suppliers have a greater influence over the supply of goods, their motivation is crucial for meeting quality, cost, and delivery expectations that result in products with value. For instance, Dell's direct method necessitates processing customer orders directly. Dell uses a pull technique to construct computers according to customer requirements and deliver them on schedule.

Dell requested that vendors maintain supplies within a 15-minute drive of the manufacturing facilities in order to accommodate this arrangement. Almost all goods are custom-made for each customer. 

A computerised message specifying the parts the company requires is sent to suppliers every two hours by the factory planning system. Accordingly, there is essentially no inventory of parts or goods in the factory, and this is only possible because of positive interactions with suppliers.

3) Technology

Customers are becoming more technologically oriented as a result of technology, focused on online trade, online shipping, online payment, online information, online virtual talking, and other related activities. Customers are more impacted by this technological process than ever before, and they are increasingly eager to learn more about their options and preferences.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

Dell's might be the best illustration of how technology affects business and boosts income.

As customers are eager to interact more, Dell's direct sales strategy relies heavily on ongoing technology advancement to help customers establish strategies for cost-effective, high-quality products.

4) Transport:

The most significant economic activity among the parts of commercial logistics systems is the transportation system. Transport costs make up between one third and two thirds of an enterprise's logistics expenditures. Additionally, timely product delivery is a difficult problem to solve without good transportation.

Therefore, businesses need to grasp the proper supply chain strategy in order to permit the flow of goods from one location to another and to guarantee on-time delivery. However, supply chain solutions are significantly hampered by an unorganised transportation infrastructure, labour force, rules, laws, and regulatory framework. Supply chain activities will be at risk if there is a proper transportation network since market delivery of the goods cannot be guaranteed.

5. From a company's perspective, logistics supply chain management is strategically important:

a) IBM

In terms of cost control, supply chain visibility, supply chain risk management, customer expectations, and globalisation, IBM faces problems. Here, supply chain visibility refers to information and collaboration with external partners, while supply chain risk management is described as forecasting customer demands and higher costs.

Customer requirements have an impact on identifying customer demands, approaches, and attitudes toward products, and globalisation refers to issues that are global in nature, such as geographic distance, cultural barriers, transportation systems, and feasibility. In order to address these problems, IBM created a future supply chain strategy centred on "instrumentation," "interconnectedness," and "intelligence."

b)Instrumentation

The creation of RFID (radio frequency identification) tags, metres, GPS systems, and tracking systems decreased the cost of inventory and improved visibility. This enables us to see actual facts taking place throughout supply chain activity.

Additionally, measuring production levels and sales levels that are predicted using technology makes demand forecasting much simpler. Once more, smart devices are used to monitor and control manufacturing, distribution, and transportation in order to reduce waste and boost efficiency. Therefore, by emphasising customers more, IBM uses the power of technology to develop a sustainable global supply solution.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

c) Interconnectivity

Collaboration with external partners and organisations lessons global challenges through interconnection with worldwide networks, such as suppliers and manufacturing facilities. In addition, sharing the risk is made possible by established regulatory frameworks from local, regional, and worldwide levels.

d) Intelligence

IBM is able to build sustainability models, network transportation systems, and distribution strategies because of very comprehensive modelling and simulation capabilities. As a result, more intelligent modelling is made possible by supply chains that are more intelligent.

e) Woolworths 

The biggest retailer in Australia, Woolworths, has struggled in the past to establish a reliable supply chain solution. Sustainability (environmental difficulties), customer focus, suppliers, transportation systems, and technology are challenges it must overcome.

After addressing such obstacles, it develops a solid supply chain strategy in order to satisfy client demands while also expanding operations in Australia and New Zealand and gaining a competitive edge over the market.

The success stories are created by working together and developing strong networking connections with suppliers, adopting policies, rules, and laws, and utilising new technology and innovative ideas (i.e. fresh foods).

The approach for sustainability makes "fresh meals" and carbon emissions its main elements. For instance, "Only a 13% reduction in carbon emissions from project growth levels was actually realised, despite promises of a 40% decrease by 2015.

This translates into an expected reduction of around 500,000 tonnes of carbon dioxide compared to new stores' required minimum reduction of 25 percent. Woolworths' carbon emissions per square metre have now decreased on average by 25.08 percent " (Our planet, n.d). Along with introducing brand-new goods like Woolworths Pet Insurance, android applications also promote sustainability.

In order to assure high-quality items for clients, Woolworth's main goal is to establish solid, long-lasting partnerships with its suppliers through open communication and constant feedback.

In terms of customer-centric approach, they are more customer-focused to deliver the most pleasurable, high-quality purchasing experience in order to meet demand at the proper time and location. They concentrate on a centralised distribution model for all inbound and outbound logistics in order to achieve this.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

From a technological perspective, businesses have adopted new technology while keeping up with advancements in the field. Consider the EFTPOS system.

f) Procter & Gamble

Global partnerships, effective network distribution channels, a sound transportation system, and incoming and outbound logistics assistance are problems that Procter & Gamble must overcome. In order to do this, they develop a supply chain strategy that involves first understanding the target customers in terms of their level of pleasure and loyalty, and then optimising the supply chain (i.e. ensuring product availability at all time).

Focusing concurrently on technology like RFID that improves supply chain management by increasing product visibility Additionally, adopting online web assistance and upholding strong ties with merchants like Wall-mart enable the customer to connect with clients and establish a solid foundation for a sustainable environment.

Conclusion

Therefore, supply chain operations are related to globalisation, sustainability, cost awareness, technology, customers, suppliers, and transportation. Barriers are now less likely to exist, encouraging international investors to invest, implement, and operate.

An Analysis Of Supply Chain Management's Strategic Importance (SCM)

In tandem, when it comes to sustainability, working together, embracing policies, rules & regulations, technology, and transportation allow us to develop positive, enduring partnerships with outside partners that may be the perfect answer for remaining competitive in the world market.

Focusing on the client is most important for boosting growth, and for this reason, choosing the proper supply chain strategy is crucial to guarantee the right product at the right time, in the right sequence, with the right measurement.