Supply Chain Analysis
Discuss about the Supply Chain Analysis and Elements of Operations.
Supply chain management is the management of finances, material and information from the supplier to the manufacturer, the manufacturer to the wholesaler, the wholesaler to the retailer and the retailer to the customer ("What is supply chain management (SCM)? - Definition from WhatIs.com", 2016). Supply chain management is one operation that creates a lot of value for the stakeholders. Supply chain management is considered to be one of the most important operations of any business organisation in the present day world as a lot of other operations are dependent upon it. Supply chain management, if effective and efficient, can provide a business with a great competitive edge as it helps in bringing down the operational costs and allows the company to adjust according to the market demands as soon as possible. Therefore, business organisations in the modern day competitive business world are relying greatly upon their supply chain management systems to achieve market competencies and increase their business efficiencies.
It has been found that applying analytical tools to supply chain management is a great idea and might be re-shaping the future of business organisations in the years to come. Furthermore, relying on traditional supply chain management systems in a global competitive business world is not possible and the companies would ultimately have to come out with new ways of designing their supply chain management systems just like the one designed by Zara that made it a world famous company and an industrial leader (Myerson, 2013).
In this report, we will design a framework for analysing the supply chain management. The framework will allow us to analyse the supply chain management of a client in the shortest possible time i.e. one day of client visit. As the time period for analysing the supply chain management is quite short, the framework will be short and would consider only the things that are necessary for measuring the actual efficiencies and inefficiencies of a supply chain management. Let us now discuss some points that can be used for analysing the supply chain management of a client during a one day visit to the manufacturing site and the regional warehouse:
Inventory à The first and the most important thing that should be taken into account while conducting a supply chain analysis is the inventory. First of all, one should thoroughly check the inventory status of the firm. One can note down the inventory capacity of the frim i.e. the maximum inventory that the firm can hold at one point of time, the time that the firm takes to completely utilise its inventory, the time taken by the firm to restock its inventory, etc. Apart from the inventory variables, one should be well prepared about the market information of the industry that the firm operates in. One should be aware of the market demand and the supplying capacity of the firm so that he can make appropriate suggestions ("Supply Chain Management: Importance of Inventory Management in Supply Chain", 2011). It is important to note down such metrics because while designing the best supply chain management system for a firm, it becomes very important that the costs are minimised while the minimum amount of inventory is maintained side by side. If the inventory runs out quickly, the firm would have to place orders for new stock at frequent intervals, which would increase the ordering cost of the inventory. On the other hand, if the firm ends up stocking too much inventory in its storage, the carrying cost of the inventory will come into play and the operational costs would increase as a result of it. Once the above mentioned information is available, it would become easier to calculate the best amount of inventory that the firm would be required to maintain if it has to reduce the operational costs, inefficiencies and strengthen its system of supply chain management (Esper & Waller, 2016).
Suppliers à One of the key elements of a supply chain management system is the suppliers that supply the necessary raw material or products to a firm. During a one day audit, one can collect thorough information about the suppliers from a senior level executive or the person who is responsible for maintaining relations with the suppliers. The suppliers are the key elements of a supply chain management system as they influence the supplies that reach a firm. The time that an order takes to reach the warehouse, the quality of the raw material, prices, etc. all are dependent upon the supplier. A company with multiple suppliers always has an edge over the other firms as it has a greater power while bargaining as compared to a company that is dependent on single or very few suppliers. One should carefully analyse the bargaining power of the supplier, his location from the warehouses, his maximum supply ability, price competitiveness, reputation amongst other firms and in the market, contracts with other firms, etc. ("10 Cs of Supplier Evaluation: Evaluating Potential Suppliers", 2016). Such information will allow to judge whether the supplier is capable of carrying out long term business with a company or is going to give more priority to other companies, because of which the business of the firm being analysed might get affected in the longer run. If the company has links with suppliers that are relatively new in the market, have high quality products and the ones whose maximum potential are not yet tapped, the company can have a great competitive edge in designing its supply chain management system as such suppliers would always give preference to the company that provides them long term business opportunities ("7 Tips for Rating and Evaluating Your Suppliers and Vendors", 2010).
Transportation à one of the most important elements in a supply chain management system is the transportation of products or services from the suppliers to the warehouses and from the manufacturing units to the retailers or directly to the consumers. While analysing the supply chain management system of a firm, it becomes crucial to analyse the modes of transportation and the logistics that the suppliers use to transport the raw material to the company. Modes of transportation play a huge role in deciding the time that a consignment takes to reach the company. For example, if the supplier sends the consignment through road, it might take the consignment a longer time to reach the company as compared to the supplier who sends the consignment through airways. The efficiency of the supply chain can also depend upon the logistic partners that the suppliers or the company have tied up with. Transportation of products or raw material through third party logistic companies can take a longer time as compared to the situation where either of the firm uses their private logistic network. For obtaining accurate data about the transportation costs, one can have a quick look into the freight invoices that the accounts department of the firm will be taking care of. Once the freight invoices are compared with all other transportation details, the results could then be used for powerful business intelligence and to take important business decisions regarding the supply chain management system. The next step that one can take is to study the transportation network that the company uses to transfers its products to the end users. Some of the key variables that need to be noted down in this step are the time taken to transport the goods or the speed with which the products reach the consumers and the cost of transportation per unit of product. Such factors might be minute, but can have a great impact on the efficiency of a supply chain management system, the operational costs and the final price of a product ("The Role of Transportation in Supply Chain Management", 2014).
Quality Of Raw Material Received And Packaging à a supply chain management system is considered to be efficient when the best quality raw materials are received within the shortest possible time. Many firms do not realize the importance of quality control in the supply chain management systems and pay a greater stress on the supply chain itself. When a firm orders a consignment, it is not necessary that the firm has been to the storage houses of the supplier and checked each and every unit of the consignment. The firm places an order usually on a call or through an e-mail while a supplier, who might be running his business from thousand miles away, has to dispatch the consignment as soon as possible. It is important that the quality of the raw materials received in the consignment is of good quality because it becomes impossible for the receiver as well as for the sender to send the whole consignment back. One should definitely make it a point to check at least 10 units from two or three different consignments by taking a random sample because taking random sample from different consignments would help in attaining more reliable and valid results ("Maintain Quality in a Complex Supply Chain With Better Information Management", n.d.). One should check the consignment received on the basis of the quality of packaging, the quality of the raw material received, etc. Poor packaging of raw material or products signifies leniency on the part of the supplier, which should never be tolerated. It increases the chances of in transit damages and loss of quality of raw material. A marginal error of 5% can be kept for damages or quality issues but above that should be regarded as an inefficiency of the supplier. Raw material with major defects can damage the machinery of the company during the production process and can cause danger to life and property ("Importance of Quality Control in Supply Chain Management", 2016). Such suppliers, who exceed the marginal error by 5%, should be carefully dealt with and if such encounters are repeated again, the firm should end their business with the supplier because lower quality raw material would ultimately have a direct impact on the end products that the company manufactures ("The Role of Quality in Supply Chain Efficiency", n.d.).
The Supply Chain Network Itself à last but not the least, one should definitely have a careful look on the supply chain network of the firm that he is analysing. The supply chain network is a graphical representation of how the raw material and the end products move to and fro from the company ("What is a Supply Chain Network? - Logistics & Materials Handling Blog | Adaptalift Hyster", 2011). The supply chain network diagram of the company will give a detailed idea about the storage houses or the ware houses that the company uses for storing its raw material, their distance from the manufacturing facilities, the modes of transportation used to transport the raw material to the manufacturing facility, distance of manufacturing unit from the market, wholesalers or retailers, the mode of transportation that the company uses to transport its end products to the market. Once all the data is obtained, one can use various tools and techniques studied in operations management and can easily find the best route for the movement of raw material and end products. Tools and techniques, such as PERT, CPM, matrices, etc. would allow us to design a structure that would minimise the transportation costs as well as the transportation time so that any inefficiency in the supply chain management system can be removed.
The review of the supply chain management of a firm is carried out so that we can make necessary improvements in it and make it more efficient. Below are some of the steps that can help a firm in improving its supply chain management:
- The company should manage the information available to it and not just inform the management about the latest trends and information.
- The management should not just rely upon logistic information for designing its supply chain management but should also incorporate market information, consumer demand, demand and supply forecasting, etc. in its supply chain decisions.
- Maintaining good relations with suppliers and vendors and keeping a track of their activities can also help in making the supply chain system more efficient.
- Another way to increase the efficiency of supply chain management system is to conduct a thorough analysis on the inventory required at particular points of time. If a firm has no idea about its inventory requirements, it will either place too many orders or will stock more inventory than required, which would ultimately increase the operational cost. On the other hand, following supply chain strategies, such as the Just-in-time strategy, a company can minimise its inventory cost and can streamline its supply chain process.
The points discussed above are few of the most important key elements of a supply chain management system. A company can never design its supply chain management system without considering the elements that have been discussed. As a result, including such elements in a supply chain analysis can help in getting ample amount of information during a short term visit. The information required to understand the above mentioned elements can be easily obtained from various departments of the firm that is being analysed and an analyst can easily convert this raw information collected into useful information that can be further used for the purpose of business intelligence. Using the information collected, the analyst can prepare a detailed report and can present it to the management by showing all the inefficacies and a new design that would help in eliminating the inefficiencies identified during the analysis.
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