Question

Explain the fundamental concept of supply chain management and its critical components of the process.

Answer 1

Supply chain management is the third marketing process. It is very important in any business activities. Supply chain management includes the management of the flow of all information, products, materials and funds from the manufacture to the supplier, then to the wholesaler, retailer and finally to the customers to meet the customers’ demand.

Hence connecting the suppliers, manufacturers, distributors and customers with the help of information system such as supply chain management software which helps in increase productivity, provide overall satisfactions, create good relation and minimize the cost is referred as supply chain management.

Supply chain management (SCM) is the managing the flow of goods and services. In the globalization era, SCM is giving attention to global systems of suppliers relationship and expanding supply chain globally. This is done to increase the competitive advantage, adding value, and reducing costs through global sourcing.

The goals of supply chain management include: -

• The inventories should be produced and distributed in the right quantities
• The inventories should be distributed to the right location
• The inventories should be distributed at the right time.
• Maintaining long term relationships with the suppliers.
• To minimize the total cost
• To fulfill customer service requirements.

The three major technologies that support supply chain management include:-

• Electronic data interchange (EDI) - This is the type of communication where the documents are transferred electronically between business partners.
• Extranets - It is network that connect business partners over the internet. Through this, they have access to certain parts of the corporate intranets of each other.
• Corporate portals - The business activities that involve transaction between single buyer and multiple suppliers and single supplier and multiple buyers are automated using corporate portals.

The critical components of the supply chain mangement are: -

• Strategic purchasing - Strategic purchasing is nothing but the process by which the strategies are planned, implemented, evaluated and controlled and focus on managing the purchase decisions based on the activities involved in purchasing function. These activities of purchasing functions focus on the opportunities that will help the organization to achieve its long-term business goals. This process focus on improving the quality by making the interaction process between customer and supplier effective.
• Supply management - This focus on delivering the product or service to the customers. This is achieved by selecting suppliers so that they can minimize the cost and improve the quality of the products/ services they are delivering to the customers.
• Logistics integration - This can be done both internally and externally so that the products or services can be distributed to the customers.
• Supply network coordination - This focus on maintaining coordination among procurement, production and distribution so that various supply chain problems can be minimized or eliminated.

The four R's in supply chain management are: -

• Responsiveness - This refers to the ability of the supply chain to change logistics and activities associated with supply chain management quickly.
• Reliability - This refers to the ability to execute activities consistently and maintain the performance as per the set standard.
• Resilience - This refers to the ability to deal with uncertainty and disruptions in the supply chain.
• Relationship - This refers to the ability to maintain trust between customers and suppliers in the supply chain.