Why Do We Need to Manage a Supply Chain?
There are many elements of a supply chain, and the area of the business in which you operate will feed into your organisations supply chain and contribute to the overall “value” that your organisation can leverage.
If for example you look after HR procurement, your value add to the supply chain will be recruiting the right calibre of staff to operate at various points within the supply chain, you may look to recruit specialist skill into your work force or head up the training and development of existing staff members. From this you will be adding value, through upskill or investment in the right talent who can help deliver your organisations product or service offering.
You may work as a category manager for raw materials with your organisation, again the interface that you have with the suppliers, building trust into the working relationship, auditing and checking supply will again all add value to your supply chain as you achieve quality improvement, effective pricing structures or innovative new products that could offer sustainability.
You can work in various areas of the supply chain, but the main goal when managing a supply chain is adding value, the value should always reflect your organisations corporate strategy and align to consumer demand.
What Is Supply Chain Management?
Supply chain management (SCM) involves managing the flow of goods. It includes the movement and storage of raw materials, work-in-process inventory and finished goods from source to consumption.
The broad objectives of Supply Chain Management are to create value, build a competitive infrastructure, leverage worldwide logistics, synchronise supply with demand and measure performance. The following points should also be considered:
- SCM is broadly about the efficient and effective management of all activities from primary suppliers right through to the point of sale.
- In some sectors SCM is a key activity, whilst in others it is somewhat less important. Procurement and supply Management (P&SM) professionals should become increasingly involved in SCM, ideally playing a leading role in its development wherever possible.
- For best results, SCM requires a senior sponsor appropriate to the sector.
- SCM has a pivotal role to play within the organisation, involving responsibility for predicting and satisfying end customers’ demand back through to the suppliers.
- SC managers have a vital role to play in managing cost, as they are in a position to monitor and influence the whole cost base across the business and the supply chain.
- SCM creates opportunities for the P&SM professional to contribute to the organisation’s success. It is an important activity that P&SM professionals need to understand and interface with.
Furthermore they should develop their SCM skills to supplement the knowledge they possess as far as traditional procurement procedures are concerned.
What Are the Key Objectives of SCM?
SCM seeks to improve the total performance of an enterprise by enhancing its responsiveness to the market place and by reducing the overall cost of supply. Fundamental to its success are effective performance measures, relevant to each key link in the chain and also relevant to the overall objective. Without agreed measures, it is difficult to focus effort on those actions which are likely to bring the greatest improvements and the most cost benefits.
A possible list of the potential goals of SCM might be as follows:
- Reduce waste/non value-added activities:
- reduce amount of handling
- reduce excess inventory, both materials and finished goods
- Maximise levels of customer service/responsiveness
- Improve supply-chain communication:
- increase speed-timeliness of information flows
- increase accuracy of information flows
- increase level of information sharing
- Reduce cycle time:
- new product development
- order lead-time
- Improve co-ordination of effort.
What Are the Key Requirements of a Supply Chain?
Within Purchasing and Supply Chain Management, Lysons and Farrington suggest that the essential requirements are connectivity, integration, visibility and responsiveness. These may be defined as follows:
- Connectivity – the capability to exchange information with external supply chain partners in a suitable format for facilitating inter-organisational collaboration
- Integration – the process of combining or coordinating separate functions to enable them to interact in a seamless fashion
- Visibility – the ability to access relevant data in terms of its relevance and importance to the supply chain
- Responsiveness - the ability to react quickly and effectively to customer needs by delivering the right product at the right time and at the right cost.
What Are the 5 Basic Components of a Supply Chain Management SCM System?
It has been suggested that SCM comprises five key elements: strategy; process; organisation; information; and performance.
- Strategy - This drives a supply chain design based on business goals and objectives and on market needs and expectations. It includes the development and management of business processes, performance targets, organisation structures, and information systems.
- Process - This describes the activities required to operate and manage the supply chain, including links between processes and relevant best practices.
- Model - An appropriate model defines management structures, department missions, and roles and responsibilities.
- Information - IT systems are tools that support supply chain planning, execution, infrastructure maintenance, and the decision-making process.
- Performance - A balanced set of process-level performance indicators that can be used to evaluate and manage supply chain performance against targets. It has been suggested by Lamming in an article within Purchasing and Supply Chain Management, by CK Lysons and B Farringdon that most supply chains are actually networks.
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