Impact of Supply Chain Management on Performance of an Organization

What is Supply Chain ?

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.

Companies develop supply chains so they can reduce their costs and remain competitive in the business landscape.

Steps involved in Supply Chain

The fundamental steps of a supply chain in order are as follows:

• Sourcing raw materials.
• Refining those materials into basic parts.
• Combining those basic parts to create a product.
• Order fulfillment/Sales.
• Product delivery.
• Customer support and return services.

Supply chains are managed by supply chain managers, who monitor lead time and coordinate the processes in each step to maximize customer satisfaction.

What is Supply Chain Management ?

Supply chain management is the process of integrating the supply and demand management, not only within the organization, but also across all the various members and channels in the supply chain so they work together most efficiently and effectively. The three main flows of the supply chain are the product flow, the information flow and the finances flow.?

SCM includes 5 basic components

1.Planning

This is a basic part for meeting customer demand and planning ahead that what they actually want. This means forecasting demand and determining how the organization will measure the supply chain to ensure that it is performing as expected in terms of efficiency and helping in achieving organizational goals.

2.Sourcing

Secondly its sourcing which includes selecting suppliers who will provide raw materials and services that create product as a critical component of supply chain. This also involves processes for ordering, receiving, managing inventory and authorizing invoice payments for suppliers too.

3.Making

This includes reviewing and accepting raw materials, manufacturing the product, quality testing and packaging.

4.Delivering

After making its Delivering and it means that the products are reached safely to the Customers .Steps involved in this process are coordinating the orders, scheduling delivery, dispatching, invoicing, and receiving payments.

5.Returning

Managers need to develop a network that involves returning products and this should work similarly as when they are delivered . Returning process needs to be flexible and responsible

With Supply Chain Management Practice , organizations have reached heights and their products quality have been improved and companies have gained profit by realizing what customer actually wants and by using these 7 principles

1.Adapting Supply Chain to Customer Needs

In order to understand customer better they are segmented on sales volume or profitability . It can also be done on product , trade channel and industry.

2.Customize Logistics Network

When customers are segmented based on their service needs, then different logistics networks are needed to serve different segment so that all are covered . This saves time and increases the profitability of an organization.

3.Aligning Demand Planning and seeing signals of Market Demand

Demand Planning is done to avoid unnecessary stock and this data is to be shared so that everyone knows and is updated . So if it is shared then it should be used in right way and to understand what is going on in the market .

4.Differentiating Products close to Customer

The technique of keeping components and assembling them only after customer places the order in order to increase product variety and while doing this standard should be maintained in order to achieve the desired product. This technique is used by dell .

There must be a flexibility to modify, alter, redesign the product and also make it readily available to the end customer on time.

5.Outsourcing Strategically

Outsourcing a part or all of the operations must be done strategically. Every business should be smart enough to realize that suppliers costs are indirectly the cost of the company. The goal of cost reduction should be shared by the channel partners to lower market prices and enhance the profit margin.

6.Developing Information Technology that support multi level decision making

Technology is changing rapidly so the organization focus should be on technology rather than ignoring it . A detailed report with all the information that flows in and out of the business but provides no real output is not desirable by any business manager. Internet applications and advanced systems make these process easier and speed up the supply chain management process by reducing time, effort and cost through automated electronic transactions, invoices and payment records.

7. Adopting channel spanning performance measures to achieve success

Every supply chain management also needs to have its own assessment card highlighting the achievement of its goals and targets. This allows the process to showcase the areas of expertise and also identify scope for further utilization of these expertise to the overall advancement of the supply chain management process.

These seven principles alone cannot make a very big impact on the supply chain process but when applied in collaboration with one another can enhance the supply chain operations to a magnanimous level. It can create wonders in terms of services which even the latest advanced technologies cannot remit for many more years to come.

Benefits of SCM

1.Lowered Costs

Managing based on demand keeps organizations from over-producing, which not only reduces labor and raw materials costs, but also cuts down on inventory management costs and transportation costs.

2.Increased Revenue

When manufacturing is streamlined to produce just enough, labor and materials can be devoted to developing new items to offer the customer and expand the product mix. Outside the product realm, this may mean offering additional services customers.

3.Asset Utilization

Supply chain management allows organizations to deliver more quickly, ensure products are available, reduce quality issues, and navigate returns with ease, ultimately improving value, both within the organization and for the customers.

Evolution and Future Of Supply Chain

In the 1980s and 1990s, increasing globalization , outsourcing and availability of information spurred the need to integrate business processes across the entire global supply chain, which resulted in the idea of supply chain management. This marked a shift from the traditional supply chain, which just involved the basic logistic steps of production. With the integration, companies gained more visibility in steps following and preceding theirs in the chain.

As such, market competition dynamics changed as well. Instead of individual companies in competition, entire chains consisting of several enterprises would compete, as company investment in their respective chains grew. Manufacturing and logistics processes were outsourced to third-party companies.

Increase in globalization and advancing technology had beneficial effects for businesses, such as improved product traceability and social responsibility efforts.

Since then, the evolution of internet businesses, and mobile computing have changed the way customers order products and the way businesses work. The internet enables customers to directly contact product distributers. This has consequently shortened the supply chain by removing some middlemen and encouraged collaboration.

However, internet businesses like Amazon have raised customer expectations for delivery times and convenience. Normalizing features like next-day delivery increases order fulfillment efficiency, but also puts stress on other parts of the chain. Because orders can be made and received faster, they need to be delivered at an equally accelerated pace.

Traditional supply chains had a more localized, bottom-up approach that dictated work closer to the supplier. Amazon's backward vertical integration represents the opposite approach, in which the company started as a retailer and worked backward to become a publisher and partial owner of its distribution channel.

The COVID-19 pandemic has accelerated the diverse sourcing trend and placed an increased emphasis on inventory management and visibility. Machine learning and artificial intelligence have played an increasingly large part in diversifying supply change and improving the responsiveness .

And at last I would like to add that Supply Chains have bought a major change in society and have been improving constantly and fulfilling the need of the customers by following all the principles .