Supply chain management is the process of the flow materials, finances and information while they go along the process from suppliers to manufacturers and from wholesalers to retailers to consumers. Supply chain management integrates and coordinates this flow both among and within the companies. The most important task of a scm is of reduction of the inventory.
Supply chain management process have been subdivided into main three parts i.e. the information flow the product flow, and the finances flow. The product flow involves the movement of materials from a supplier to the customer. The information flow possesses processing orders and upgrading the delivery status. The financial flow includes payment schedules, credit terms, and consignment and ownership title arrangements.
Business organizations mainly capitalize on supply chain capacities and resources to bring the products and services in the market in a much quicker process at the lowest possible cost. Measuring supply chain performance can manage a greater knowing of the supply chain and improve its performance overall. Companies have found out that that for competing in a pressurized environment, it is necessary to estimate and monitor firm performances. Many types of perspectives of supply chain performance measures (scpm) are non cost perspective and cost perspective (Borgström & Hertz, 2011). An efficient and performing supply chain helps a business save money. This in turn reduces spoilage and decaying, companies that practice supply chain process report outstanding cycle time and cost reduction, for example, Wal-Mart stores inc. announced doubling of inventory turnarounds. An important subject of supply chain management is to view the processes, people and facilities network that collects materials that is raw and transform them into products that are ready to use and finally send it to the end users as a chain which is acknowledged. (Eßig, Hofmann, & StoÌˆlzle,2013).
Improvement of financial performance by strategic management of SCM: To reduce operational in efficiencies and improve customer satisfaction many companies initially focus on supply chain management. The visibility and control on the supply chain improves as a result, which in turn leads to better financial performance. The company’s competitive capability improves because of supply chain management. Globally, the companies are competing against each other as a part of the supply chain and not individually. The task of every company is to ensure how to cut costs, improve quality and operate effectively through supply chain management (Kang & Kim, 2010). The economies of china and some other countries are booming right now as a result, many companies have started sourcing in such countries. Supplier performance is closely linked to cost and benefit. VElda b.v. wants to have Good quality products with low cost as a result they have sourced half of their products in china. The scm functions impact the financial performance, identification of business process and find out ways of improve the business processes that will help to improve both scm and financial performance. The main question is what to improve in supply chain process to get maximum financial performance. To improve financial management the reduction of spreadsheets are necessary. Many enterprises plan their purchasing using unreliable spreadsheets. To be sure that the companies are using accurate information, they should be moving up in an affordable supply chain platform. The principal at the Hackett Group says that the procurement organization should play a vital role by becoming more as a process enabler and by looking for more opportunities by leveraging the capacities of the suppliers and improving current processes. Supply chain management is a complex process. The main approach is to understand the logistics function and identification of those areas which have the capacity to affect revenue in the greater way. The council of supply chain management professionals (CSCMP) has defined logistics management as containing outbound and inbound management of transportation, warehousing, order fulfillment, inventory arrangement, fleet management, and supply demand planning. Approximately 9% of sales, 50% of transportation costs make up logistics costs. Transportation poses to be the largest among the logistics costs in supply chain management, so improvement in the transportation activities could leverage the financial management in scm (Konur,2013).
Revenue growth is one of the most important aspects of scm which remains in the minds of the topmost executives and it is directly impacted by the scm. The relation shared by transportation and revenue growth goes beyond just the delivery of the products to the end users.
A good transportation system is important not only for delivering perishable goods and raw materials but also goods with short life span. The ability to meet market demand, lead time and the ability to meet market demand and sales everything have impact on revenue growth. This is all affected by the company’s assurance to the customers that the shipment will be delivered to them at the right time, at the right place and in a good condition (Nikabadi & Zamanloo,2012).
Improvement of non financial performance by strategic management of SCM: Although financial performance is the most important criteria for all companies there are many non financial aspects too which need careful attention. Such non financial indicators are market share, innovation performance etc. which also needs evaluation in order to assess their impact on scm. The long term objectives of scm are to integrate supply chain for all members and increase market share also.
Higher market share might be characterized by use of better product quality and efficient use of chain resources. For reduction of the number of transactions it is profitable to work with fewer suppliers. Strategic planning is required to enhance coordination among various groups in the company through sharing and information retrieval. The departmental barriers are reduced through the practice of such scm processes. In a well coordinated organization good relationship between suppliers and customers are maintained. to improve coordination with suppliers good relationship should be maintained ,keeping few suppliers at bay is necessary and also the practice of e procurement, technology, product ,process innovations is better achieved through coordination with fewer suppliers. The ordering process could be categorized properly with the use of e procurement (Scm.ncsu.edu,2015).
Finally coordination with customers is of utmost importance which could only be achieved through close partnerships. The orders given by the customers should be clarified and negotiated properly to avoid design and order changes in the later stages.
Management of vulnerability of supply chain disruptions: the normal flow of materials and goods are disturbed by the disruptions in scm. This in turn exposes the companies to financial and operational risks from time to time catastrophes disrupt the supply chain processes. Mitigation of these catastrophes that disrupt scm are difficult because of the serious nature of the catastrophes. Current supply chain practices have been identified that have increased the vulnerability. Thus it has been proposed that to avoid vulnerability in supply chains strategies such as providing advance warning, coping up, and surviving should be implemented. Well developed strategies could be better in mitigating such vulnerabilities. The common business practices that contribute to supply chain vulnerabilities are Globalization, Decentralization, outsourcing, reduced number of suppliers etc.
Advance warning strategies:
An advanced warning strategy can give enough time to the companies to take necessary precautions in order to mitigate the disruption effects. If it is forecasted that a natural calamity is going to happen then scm process gets enough time to channelize their supply chain in such a way to reduce disruption (Tandler, 2013).
These strategies are flexible in nature and it produces many options of alternatives in case any vulnerability occurs. Extra resources should be kept apart in redundancy process. Flexibility can avoid risks.
Supply chains should use air, sea and ground transportation to avoid vulnerability. For companies who have suppliers outside U.S. other transportation methods are more important. It is advisable to keep backups for components that are critical in nature that can be kept with small amount of investment.
Insurance against other risks:
many supply chain processes such as transport, labor, facilities, supplies, can be insured against accidents, natural calamities and theft. Some of such coverage’s involve loss of expenses, extra costs, assets and profits because of damage to property and physical loss.
Supply chain management is the whole process of the flow materials information and finances as they go along the process from suppliers to manufacturers and then from wholesalers to retailers to end users. Across the world supply chain management is applied due to its useful functions such as improved financial performance, delivery time reduction and satisfaction of the customer. Due to its systemic impact and global nature on the firm’s financial performance, the supply chain unjustifiably faces a lot of risks than other areas of the company. Risk is an integrated part of supply chain management. But respite of that it attracts very less attention than it deserves from a very wide range of companies.
Reflection: the supply chain management has become more complicated with the enlargement of the company and its range of products. It is a very pressurized job for the supply chain executives to find more developed customer centric supply chains and find different innovative ways to reduce cost. Organizations must think of preparing for the rebounding while responding to the conditions of the labor pool, deflation and issues surrounding energy and sustainability. Studies show that those companies achieve great advantages who are striving for environmental sustainability. As a core competent of their supply chain Strategy Company should include sustainability. The supply chain managers are always thinking of ways to respond to changes, increase profitability and expand rapidly.
Borgström, B., & Hertz, S. (2011). Supply Chain Strategies: Changes in Customer Order-Based Production. Journal Of Business Logistics, 32(4), 361-373. doi:10.1111/j.0000-0000.2011.01031.x
Eßig, M., Hofmann, E., & StoÌˆlzle, W. (2013). Supply Chain Management. MuÌˆnchen: Franz Vahlen.
Kang, J., & Kim, Y. (2010). Coordination of inventory and transportation managements in a two-level supply chain. International Journal Of Production Economics, 123(1), 137-145. doi:10.1016/j.ijpe.2009.07.008
Konur, D. (2013). A comment on “Coordination of inventory and transportation managements in a two-level supply chain”. International Journal Of Production Economics, 141(1), 434. doi:10.1016/j.ijpe.2012.06.019
Nikabadi, M., & Zamanloo, S. (2012). A Multidimensional Structure for Describing the Influence of Supply Chain Strategies, Business Strategies, and Knowledge Management Strategies on Knowledge Sharing in Supply Chain. International Journal Of Knowledge Management, 8(4), 50-70. doi:10.4018/jkm.2012100103
Scm.ncsu.edu,. (2015). What is Supply Chain Management? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University. Retrieved 10 February 2015, from https://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management
Tandler, S. (2013). Supply Chain Safety Management. Wiesbaden: Imprint: Springer Gabler.