In business, supply chain management, which include the transportation and storage of goods, between locations and companies, and has the process and circulation of raw materials, work-in-process, and finished products, from point of production to point of sale. The term “supply chain” is used for several reasons, including identifying an aspect of supply chain management that focuses on the interaction of buyers and sellers. Supply chain management is essential in any sustainable business environment, because it determines the amount of good a company can produce, in the quantity that can be sold, at the price that can be paid, to the satisfaction of buyers. It also defines the methods and measures companies take to ensure that they are complying with the supply chain principles of quality, cost control, waste management and efficient distribution.
There are many supply chains in today’s business environment. The supply chain management systems that companies use depend on the nature of their products. Some products are large-scale products such as automobiles and airplanes, requiring long lead times and expensive logistics strategies. Other products, such as technology devices, deliver goods quickly and do not require extensive inventory or shipping routes. In these cases, companies rely on computerized logistics systems and real-time information regarding inventories, transportation and packaging, product specifications and capabilities, location of manufacturers, and so on. These supply chains require detailed, analytical reporting capabilities to determine the most efficient ways of managing resources.
Supply chain management Analytics can provide insight into the supply chain management systems that companies utilize. One example of this is supply chain optimization (SCM). Supply chain optimization is the optimization of processes to achieve optimized levels of productivity, cost and performance. An effective supply chain management system should first identify and analyze all of the variables that impact the supply chain. For example, the analysis may include determining what types of activities add value to the overall supply chain, determining where improvement is needed, identifying and analyzing any sources of variability, such as staffing and labor, establishing the most efficient routes of communication and delivery, identifying the source of any variations in information that affect the supply chain, evaluating any potential threats to the integrity of the supply chain, and establishing the best ways to protect it from threats such as theft, fraud and sabotage.
The analysis process also includes determining the relationship between suppliers and recipients, identifying the most cost-effective vendors for a given product category, determining if there are any trade barriers, establishing the relationships between suppliers and buyers, determining which suppliers provide the highest quality and best service, analyzing any financial relationships, determining the effect of mergers and acquisitions on the supply chain management and competitive advantage. All of this is done in order to optimize the sourcing, manufacturing, distribution and retailing of a product and create a competitive advantage. It takes planning, research, analysis, metrics and software to implement the various aspects of supply chain management. This is why some companies choose to outsource to an outside provider.
Outsourcing is not right for every business and there are a number of reasons why. Some businesses simply cannot afford to spend time, money and energy on supply chain management systems. Others are aware of the benefits but lack the expertise or time to implement their own supply chain management systems. Still others have no need for supply chains because they already have all of their supply chains managed internally. However, businesses should look closely at the needs of their customers and find ways in which to improve them before outsourcing to providers of supply chain management systems.
Improving supply chain management is important for businesses because it directly affects the bottom line. A company that spends too much time on its supply chain management systems may not be able to successfully compete in today’s market. For example, a business process that focuses on just logistics management may not have enough opportunities for automation or better efficiency. The bottom line for companies needs to be carefully balanced so that profits are realized, employees are satisfied with their positions, and the company is profitable and sustainable.