Logistics Operations Supply chain management – Definition and key issuesIf today you are not in a company which is impacted by Supply chain management or an environment of continuous replenishment and think that it won’t affect you in any way you are probably wrong. In fact it will impact you sooner than later. Appearing in various industries the concept is quickly moving into smaller companies. It is better one starts to know what it is and what it means to oneself. SCM or Supply Chain Management is a dynamic paradigm and is swiftly driving through companies.
While most of the SCM relates to large companies supplying large retailers or grocers the attention as such received by SCM is quite phenomenal today. If you consider additionally the global perspective involving customers, competitors and suppliers then the magnitude of the supply chain is very significant and huge. Let us consider what this SCM all about is. Actually SCM is a reverse of prior practices where manufacturers supplied products to customers as the manufacturers wanted to. But today customers tell the suppliers how and when they wanted their inventories to be delivered.
The key driver behind SCM is to remove the inefficiencies, excessive costs and excess inventories from the supply pipeline, which extend from the customer back through his suppliers and through his suppliers’ suppliers and so on backwards. By this method of having the whole thing being driven by the customer, it is hoped that inventories, caused by uncertainties and slow responses, will be totally eliminated. While sales incentives exist to take care of major suppliers carrot of category management or similar such programs, logistics is the key to the ultimate success of Supply Chain Management. The five key issues of Logistics Effectiveness are core to Supply Chain Management: Movement of ProductMovement of InformationTime / ServiceCostIntegration, both internal and external, both organizations and systems. Supply chain management essentially requires a logistics model based on quick order to delivery response.
A model which directs its focus from the vendors doors through to delivery to customer’s premises. The model must in fact meet the customer’s most demanding as well as specific requirements. Demanding the use of processes and technology it requires responsiveness and organizational flexibility as well as internal and external teamwork.
Forward-buying is a common practice for causing inefficiencies, excess inventories and high costs. At the surface of it, it looks as though it is buying at a low price. But when it comes to reality, this practice leads to additional, higher costs and negative impact throughout the supply chain and is very inefficient. It strains the responding capability of suppliers while also straining the handling of products by the distribution department of the customers. Therefore forcing excess sales through the supply chain, the hidden costs of manufacturing and distribution valleys, while the huge peak caused by the forward-buy remains significant.
It creates for both the supplier and the customer an operational and cost inefficiency. So supplier chain management is all about what the customer wants and demands and not what the supplier is capable of doing at the moment. Though customer requirements vary from customer to customer they do have consistencies with respect to logistics such as: