What Is Supply Chain Management - Term Paper Example

? Supply Chain Management What is Supply Chain Management? A Supply Chain is a system that transforms natural resources or raw materials into finished products with the help of people, technology, information and other such resources, and delivers the finished product to the end consumer. Supply Chain Management is the designing and management of the process that will ensure that the Supply Chain will be effectively carried out across organizational boundaries so as to meet the requirements of the end customer. (supplychainmanagement.in). Supply Chain Management can also be referred to as the integration of developing, planning, outsourcing, making and delivering the finished product to the end consumer, in a manner that will give an organization an added advantage over its competition. The make-buy decision: Today, Managers have to make a lot of decisions for the smooth running and cost efficiency in an organization. The make-buy decision is one of the decisions they have to deal with on a regular basis, especially in this time of cut throat competition. The make-buy decision refers to the decision that a manager needs to make in terms of producing a certain part required for the final product in-house, or purchasing it from an external source, that is outsourcing. The main factors that play a role in making this decision are cost efficiency and the capability of production of the required material. Some of the reasons why organizations prefer to make their required products are: Better cost efficiency, higher quality control, lack of competent suppliers for the product, necessity to maintain confidentiality and guarantee of continuous supply of the said material. Sometimes however, a manager might prefer to outsource the products due to reasons such as, lack of expertise for the making of the product, inability to produce the required quantity, specific brand preference for better output, cost effectiveness when it comes to purchasing the product, etc. Sourcing strategies and supply chain configurations While outsourcing products, the decision makers at organizations, must think of the various aspects that will affect the organization, not just in the manufacturing of the product, but also the image of the organization. An outsourcing strategy must be simple. It must take into account the various factors that have resulted in coming to the buying decision over the making decision. For instance, the strategy must involve a deep reflection on the cost factor. By comparing the technological differences between the various optional outsourcing countries, a decision can be reached as to which alternative can be picked to ensure greatest cost efficiency. Thought and research must also be put into the marketing strategy of the company. That is, outsourcing the manufacturing of a product to a low cost country may work wonders if the product is sold overseas but may completely backfire if it needs to be sold in the immediate vicinity of the manufacturing plant, for the simple reason that the costs will not match. While configuring a Supply Chain all these factors must be taken into consideration, especially the cost factor, since cost effectiveness in usually the most obvious reason to outsource. Thus, one must carefully research the difference in cost in various countries and compare them then to other factors such as availability of resources and dependence levels, to ensure that the organization’s supply chain is effective from its suppliers to its consumers. Strategic supplier selection: Selecting the apt supplier for the organization involves more than just comparing costs. A manager has to take into account various factors such as value for money, reliability of the supplier, availability of the materials in the immediate vicinity of the supplier, quality control and service. Few more factors that could give a supplier the edge over his counterparts are, speed and flexibility in delivery, strong service and clear communication to avoid confusion and financial security so that they can deliver what you need and when you need it, and on a credit basis, saving a lot of time. (businesslink.gov.uk). Selection of the right supplier must also be followed by building and managing relations with them. A good relationship with one’s supplier allows for open communication that is essential to avoid major problems and will encourage them to give their advice about new products or technology that may be more time and cost effective. (businesslink.gov.uk). Aligning supply with corporate strategy In every organization, it is essential for the purchasers to understand that the decisions that they make in terms of choosing a supplier, can and will impact the entire organization. Every organization must align their various strategies, Corporate, Competitive and Supply Chain, to be able to function smoothly. For this reason, it is important that in every organization, the corporate and competitive strategies are well defined, so that it is possible for the purchasers to define the supply chain strategies in terms of those of the organization. This will help the organization to ultimately reach its goals, such as profitable growth, maintaining security and confidentiality when necessary, corporate accountability, controlling the costs of raw materials, etc. Conclusion: Zara’s Supply Chain Strategy Zara, a famous fashion brand has a very unique strategy for their functioning. Zara currently caters to fashion clothes for Men, Women and Children. It includes both under wears and outer wears. Besides these it also provides fashion accessories for all the categories. They believe in exclusivity and thus, prepare few pieces of any particular design. Zara runs on Just in time policy. They introduce new designs and release new products in record time. Their strategy is to produce and release products in few numbers in a store. This strategy thus builds up a customer’s anticipation for the next product or design to be released. Zara does not need to focus on advertising their products, because Zara does not need to build their brand image. Their target is production and meeting the need and anticipation of their customers. They prefer focusing on quality instead. Also, since most of their products fly off the shelves, they need to be replaced quickly. This is why Zara has most of its suppliers within Europe, for the simple reason that they save a lot of time on shipping or transportation of required material. This also allows them to make changes in orders that they might not be able to make, if their suppliers were far out and distant in places like China. Zara runs on public demand, their designs are vouched for by their niche crowd. Zara works on low volumes and quick design changes –every week. This helps to attract customers more often. It also helps in keeping inventories low. (Craig, Jones and Nieto 2004). Their persistent introduction of new products in small quantities, ironically, reduces the usual costs associated with running out of any particular item. Empty racks at Zara don't chase away their customers to other stores because shoppers always have new things to choose from. For a person at a Zara, it is all about the experience of the store. Being out of stock in one item helps sell another, since people are often happy to snatch what they can. REFERNCES: Craig, A, Jones, C and Nieto, M 2004, Zara: Fashion Follower, Industry Leader, viewed on March 29, 2011 http://www.philau.edu/sba/news/zarareport.pdf supplychainmanagement.in, Supply Chain Management - from supplier's supplier to customer's customer, viewed on March 29, 2011 http://www.supplychainmanagement.in/scm/index.htm businesslink.gov.uk, Growth through Strategic Sourcing, viewed on March 29, 2011 http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073791026&r.l1=10744047 96&r.l2=1074456652&r.l3=1073920782&r.s=sc&type=RESOURCES Read More