, A country’s status as a developed or developing nation is indicated by the percentage of output from its service economy. The service industry is typically robust and healthy in developed nations. Supply Chain Management, or supply chain management operations, are the foundation of many service businesses. You will eventually come across the term “supply chain management” if you frequently shop at Wal-Mart. And wonder how they are able to offer high-quality goods at low prices. To put it more succinctly, supply chain management typically improves the efficiency of a company’s operations by fostering collaboration among various functional departments in an extended enterprise environment that includes the company, its suppliers, and its distributors. Supply chain management has been pioneered by Wal-Mart.
The majority of SCM definitions
A global and integrative approach is required to manage the process. Cost Reduction & SCM There are a number of cost reduction techniques available for management to reduce cost. Such as Manpower Reduction, Strict Supervision, Compromise with Quality, Overtime Work, and so on. The scope extends from sources of supply to final customers. In addition to products and services, information and financial flows are included. o The objective is to satisfy customer demand at the lowest possible cost. However, a wasteful strategy is cost reduction at the expense of quality. SCM aims to cut costs without compromising quality.
Supply chain management decisions
There are two broad categories of supply chain management decisions: strategic and operational. Strategic decisions, as the name suggests, are typically made over a longer time frame. From a design perspective, these guide supply chain policies and are closely linked to the company’s strategy. Operational decisions, on the other hand, are focused on day-to-day activities and have a shorter time horizon. The goal of these kinds of decisions is to manage the flow of products through the “strategic” planned supply chain in an effective and efficient manner.
Decision areas of SCM
The following are the four major decision areas in supply chain management:
(1) Location; (2) Production; (3) Inventory; (4) Transportation (distribution); and each of these decision areas contains both strategic and operational components.
Choosing a location –
The first natural step in creating a supply chain is to put production facilities, stocking points, and sourcing points in different locations. A commitment of resources to a long-term strategy is required for the location of facilities. The possible routes by which the product reaches the final customer are also determined once the size, number, and location of these are established. Despite the fact that location decisions are primarily strategic, they also have operational implications.
Controls over production –
The allocation of suppliers to plants, plants to Distribution Channels (DC), and DCs to customer markets are among the strategic decisions. Other strategic decisions include what product to produce and which plant to produce it in. The company’s revenues, expenses, and customer service level are significantly impacted by these choices. The construction of master production schedules for operations supply chain management, the scheduling of machine production, and equipment maintenance are among these choices. Balanced workload and quality control measures in a production facility are additional considerations.
Purchasing decisions –
These refer to methods for managing inventories. At every point in the supply chain, there are stocks of either raw materials, semi-finished goods, or finished goods. Additionally, they may be moving between locations. Their primary function is to provide a buffer against supply chain uncertainty. In supply chain operations, effective management of inventories is essential because holding inventories can cost anywhere from 20% to 40% of their value. The fact that top management sets goals makes it strategic.
Decisions regarding transportation –
These decisions are more strategic when it comes to mode selection. These are closely related to inventory decisions because the best mode of transportation is frequently selected by balancing the direct cost of inventory with the cost of using a particular mode of transportation. The quality of customer service and the location of the business play crucial roles in these choices. Since transportation accounts for more than 30% of logistics costs, it makes economic sense to operate effectively. The company’s transport strategy can only be effectively managed through careful management of its shipment sizes, equipment routing, and scheduling (lot-for-lot versus consolidated bulk shipments).
Supply chain management system
Software for supply chain management, hardware to run the systems, planning, execution, and other processes are all parts of a supply chain system. Although putting supply chain management into action is a major undertaking, it can give you a long-term advantage over your rivals. Strategic planning, system analysis, supply chain implementation, and supply chain coordination are all part of the supply chain’s implementation. In most cases, features in SCM software let businesses handle payments, track sales, plan production, manage inventory, and see where their shipments are. Additionally, you can use all of this information to communicate with other partners. The inventory or demand forecast, which was developed from the practice of inventory management, is the heart of SCM software.
Benefits of an SCM software
The numerous benefits of supply chain management (SCM) include lower operating costs, enhanced customer relationships. And improved coordination among partners, distributors, and suppliers. A supply chain management system will coordinate with the manufacturers of medical suppliers, retailers. And the logistical department of major hospitals for a medical services company that distributes surgical. And medical supplies to medical practitioners and the home health care industry. So, the supply chain management system for warehousing & distribution will be able to predict the demand for medical and surgical products by seasons, regions, and customer types by keeping track of usage patterns. The medical service company and major hospitals that order medical supplies will save money on inventory costs as a result.
A supply chain management system will effectively coordinate between suppliers of clothes, paper goods. And Wal-Mart’s retail stores to reduce inventory costs for a large retailer like Wal-Mart, which has numerous regional distribution centers. Because it is able to pass on the savings from reducing inventory costs to customers, Wal-Mart is able to offer lower prices on a variety of common products. Supply Chain Management, or SCM, is the foundation of many service businesses.