Supply Chain Management Nowadays - Essay Example

Supply chain management Supply chain management can be seen as control of funds, materials, and data as they go through the processes involved in getting them the final consumer. Supply chain management has to do with transformation and coordination of flows between companies and also within a single company. The final aim of a good supply chain management system is to reduce the required inventory. Nowadays, a lot of organisations tend to implement complex software systems in order to ensure that they achieve successful supply chain management. Supply chain management provides organizations with an opportunity to improve efficiency and reduce operational cost. Supply chain management also helps to improve customer service, thus increasing effectiveness. Supply chain management is an important aspect of operation management as it has profound effects on the successful functioning of an organization. Proper supply chain management can be used to eliminate redundancy and remove barriers arising from poor communication, by monitoring, controlling and coordinating the various processes within an organization. "Identifying the components of the supply chain, facilitating better decision-making, creating improved communication, and identifying weak links in the chain causing bottlenecks in an organization are crucial to supply chain integration. There are three principle elements of supply chain integration: management of information and financial flows, inventory management, and management of relationships of trading partners." (Power, 2005) According to Czinkota, Ronkainen and Moffett, supply chain management is the integration of three concepts; they are the systems concept, the total cost concept and the trade off concept. These concepts are also important to the business logistics. The system concept is based on the notion that materials- flow activities within and outside of the firm are so extensive and complex that they can be considered only in the context of their interaction. The system concept intends to provide the firm, its suppliers and its customers both domestic and foreign, with the benefits of synergism expected from the coordinated application of size. To get the system concept works, information flows and partnership trust are instrumental. Logistics capability is highly information dependent, since information availability is key in planning and to process implementation. (http://www.oppapers.com/topics/supply-chain-concepts/0) This paper discusses how the benefits reducing cost and profits can be achieved by utilizing information systems and information technology. I will also examine the supply chain processes between sellers and buyers. Due to continuous advancement in the field of information systems technology, it is possible for supply chain partners to coordinate more effectively to optimize the performance of their various organisations. Also, information sharing is a requisite in this coordination, and information sharing has been facilitated quite a lot by these advances in the field of information technology. According to Banavar et al, "Modern businesses are dynamic in nature and to stay competitive (organizations) need to optimize their business processes by understanding and reacting to the rapid changes in their environment" (Banavar, Black, Caceres, Ebling, et al, 2005) Serious use of supply chain management started in the 1980s. "It is to describe the range of activities coordinated by an organisation in order to procure and manage their supplies." (Oliver and Webber, 1982) Inventory control is a very essential part of the supply chain process of any organization, because inventory control has to do with reducing the cost of inventory. There are 3 major factors involved in the inventory control decision-making process. These are: The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand The cost of holding the stock The cost of placing an order or the set-up cost of production (http://www.oppapers.com/topics/supply-chain-concepts/0) Factors that impact on a successful supply chain management Some factors that have an impact on successful supply chain management include: Inventory Management Cultural background Logistics Internet and intranet usage Inventory Management An example of this is the JIT (just in time) principles of manufacturing, which were developed by Nippon Wireless and Telegraph Company, in the 1960s, in Japan. "The longer the lead time from placing the order to receiving the goods, the greater the likelihood that amounts ordered no longer match requirements. Because of uncertainties on the supply side inventory management becomes more significant." (Lamey, 1996. http://www.oppapers.com/topics/supply-chain-concepts/0) Cultural background Culture is the aspect of the human environment that is man made. It consists of the sum total of knowledge, morals, beliefs, customs, art, laws etc. cultural background here refers to the things that people, think and do as members of a given society. "A universal is a mode of behaviour existing in all cultures. Universal aspects of the cultural environment represent opportunities for international marketers to standardize some or all elements of a marketing program." (http://www.oppapers.com/topics/supply-chain-concepts/0) International Logistics International logistics involves the designing and management of a system that is used to control the reverse and the forward flow of materials, information and services through an international corporation. For example, if a company exports to a single, specific market from a single country, the usual approach is select a dependable mode of transportation that would ensure the safe delivery of the goods, and within a reasonable time frame, to ensure a sensible carrier cost. As a company becomes international, such a solution to the movement of products could prove costly and highly inefficient for seller and buyer. At some point in the growth and expansion of an international firm, costs other than transportation are such that an optimal cost solution to the physical movement of goods cannot be achieved without thinking of the physical distribution process as an integrated system. When a foreign marketer begins producing and selling in more than one country and becomes an international marketer, it is then the time to consider the concept of logistics management, that is a total systems approach to management of the distribution process that includes all activities involved in physical moving raw material, in- process inventory and finished goods inventory from the point of origin to the point of use or consumption. (Albaum, Strandkov and Derr, 2002. retrieved from http://www.oppapers.com/topics/supply-chain-concepts/0) Internet and intranet usage The Internet has had a huge impact on commercial life, and has helped in restructuring the modes of communication between organisations externally and also internally. The Internet has played a major role in the transformation of supply chain management. Most organisations are now able to conduct a lot more comparisons globally, between suppliers, so as to choose from a wide variety of choices. Also the supplying firms can be more informed about the structure of the supplier network. Bibliography Banavar, G., Black, J., Caceres, M., et al. (Fall 2005). Deriving long-term value from context-aware computing. Information Systems Management. Boston. 22(4). p 32. Retrieved June 10.2006 from ProQuest Chopra, Sunil, and Peter Meindl, (2001), Supply Chain Management: Strategy, Planning, and Operations, Upper Saddle River, NJ: Prentice-Hall, Inc G. Albaum, J. Strandkov and E.Derr, International Marketing and Export Management (Harlow: FT Prentice Hall, 2002) Sergey Frank, "Global Negotiations: Vive Les Difference!" Sales and Marketing Management 144 (May 1992) Lambert, Douglas M., James R. Stock, and Lisa M. Ellram, (1998), Fundamentals of Logistics Management, Boston, MA: Irwin/McGraw-Hill, Chapter 14 Oliver, R.K and Webber, M.D (1982) Supply Chain Management: logistic catches up with strategy. Outlook. Allen and Hamilton Inc. P. Ghauri and P. Cateora (2006), International Marketing, Second Edition, McGraw-Hill Education) Power, D. (2005). Supply chain management integration and implementation: a literature review. Supply Chain Management. Bradford. 10(3/4). p.252. Retrieved from ProQuest June 12, 2006 http://www.oppapers.com/topics/supply-chain-concepts/0 Read More