Unit2supply chain.docx

Unit2supply chain.docx

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Unit2supplychain

UnitTwoSupplyChainManagement

PartOneText

TheConceptofSupplyChainManagement

Whatissupplychain?

Thesupplychainistheseriesoflinksandsharedprocessesthatexistbetweensuppliersandcustomers1.Theselinksandprocessesinvolveallactivitiesfromtheacquisitionofrawmaterialstothedeliveryoffinishedgoodstotheendconsumer.Rawmaterialsenterintoamanufacturingorganizationviaasupplysystemandaretransformedintofinishedgoods.Thefinishedgoodsarethensuppliedtoconsumersthroughadistributionsystem.Generally,severalcompaniesarelinkedtogetherinthisprocess,eachaddingvaluetotheproductasitmovesthroughthesupplychain.

Infact,theparticipantsofasupplychainincludeallcompaniesororganizationswithwhichthefocalcompanyinteractsdirectlyorindirectlythoughitssuppliersorend-users2.Inanygivensupplychainthereissomecombinationofcompanieswhoperformdifferentfunctions.Therearecompaniesthataresuppliers,manufacturers,distributorsorwholesalers,retailers,andcompaniesorindividualswhoarethecustomers,thefinalconsumersofaproduct.Supportingthesecompaniestherewillbeothercompaniesthatareserviceprovidersthatprovidearangeofneededservices.

However,tomakeaverycomplexsupplychainnetworkmoremanageable,thebasicparticipantsofasupplychaincanbesummarizedas:

Suppliers-Theyareorganizationsthatprovidegoodsand/orservicestoapurchasingorganization（amanufactureroradistributor）.

Manufacturers（producers）-Theyarethecompaniesthatmakeaproduct.Thisincludescompaniesthatareproducersofrawmaterialsandcompaniesthatareproducersoffinishedgoods.Producerscanalsocreateproductsthatareintangibleitemssuchasmusic,entertainment,software,ordesigns.

Distributors–Theyarecompaniesthattakeinventoryinbulkfromproducersanddeliverabundleofrelatedproductlinestocustomers3.Distributorsarealsoknownaswholesalers.Theyselltootherbusinessesandtheysellproductsinlargerquantitiesthananindividualconsumerwouldusuallybuy.Adistributoristypicallyanorganizationthattakesownershipofsignificantinventoriesofproductsthattheybuyfromproducersandselltoconsumers4.Inadditiontoproductpromotionandsales,otherfunctionsthedistributorperformsareinventorymanagement,warehouseoperations,andproducttransportationaswellascustomersupportandpost-salesservice5.

Retailers-Theyarecompaniesthatstockinventoryandsellinsmallquantitiestothegeneralpublic.Thisorganizationalsocloselytracksthepreferencesanddemandsofthecustomersthatitsellsto.Itadvertisestoitscustomersandoftenusessomecombinationofprice,productselection,service,andconvenienceastheprimarydrawtoattractcustomersfortheproductsitsells6.

Customers-Theyareanyorganizationthatpurchasesandusesaproduct.Acustomerorganizationmaypurchaseaproductinordertoincorporateitintoanotherproductthattheyinturnselltoothercustomers7.Oracustomermaybethefinalenduserofaproductwhobuystheproductinordertoconsumeit.

Serviceproviders-Theyareorganizationsthatprovideservicestoproducers,distributors,retailers,andcustomers.Serviceprovidershavedevelopedspecialexpertiseandskillsthatfocusonaparticularactivityneededbyasupplychain.Somecommonserviceprovidersinanysupplychainareprovidersoftransportationservicesandwarehousingservices.Financialserviceprovidersdeliverservicessuchasmakingloans,doingcreditanalysis,andcollectingonpastdueinvoices8.Someprovideproductdesign,marketresearchandadvertising.Stillotherserviceprovidersofferinformationtechnologyanddatacollectionservices.

Therefore,mostsupplychainsexhibitthesebasiccharacteristics:

1.Thesupplychainincludesallactivitiesandprocessestosupplyaproductorservicetoafinalcustomer.

2.Anynumberofcompaniescanbelinkedinthesupplychain.

3.Acustomercanbeasuppliertoanothercustomersothetotalchaincanhaveanumberofsupplier–customerrelationships.

4.Whilethedistributionsystemcanbedirectfromsuppliertocustomer,dependingontheproductsandmarkets,itcancontainanumberofdistributorssuchaswholesalers,warehouses,andretailers9.

5.Productsorservicesusuallyflowfromsuppliertocustomer.Likewise,designanddemandinformationusuallyflowsfromcustomertosupplier.（Physicalproductsmove“downstream”,whiledemandinformationflows“upstream”.）

Asupplychainhasthreekeyparts:

Supplyfocusesontherawmaterialssuppliedtomanufacturing,includinghow,when,andfromwhatlocation.

Manufacturefocusesonconvertingtheserawmaterialsintofinishedproducts.Distributionfocusesonensuringtheseproductsreachtheconsumersthroughanorganizednetworkofdistributors,warehouses,andretailers.

WhatisSupplyChainManagement?

Insimplewords,supplychainmanagementreferstoeffectivelyandefficientlyoperatethewholesupplychainprocess.Supplychainmanagementisoneofthemostimportantstrategicaspectsofanybusinessenterprise.Decisionsmustbemadeabouthowtocoordinatetheproductionofgoodsandservices,howandwheretostoreinventory,whomtobuymaterialsfrom,andhowtodistributetheminthemostcost-effective,timelymanner10.

Asweallknow,companiesthatdobusinesstogetherarelinkingupclosely.Theyaredoingthistobettercoordinatetheiractionsanddrivecostsoutoftheirbusinessoperations.Thereisadifferencebetweentheconceptofsupplychainmanagementandthetraditionalconceptoflogistics.Logisticstypicallyreferstoactivitiesthatoccurwithintheboundariesofasingleorganizationandsupplychainsreferstonetworksofcompaniesthatworktogetherandcoordinatetheiractionstodeliveraproducttomarket.Alsotraditionallogisticsfocusesitsattentiononactivitiessuchasprocurement,distribution,maintenance,andinventorymanagement.Supplychainmanagementacknowledgesalloftraditionallogisticsandalsoincludesactivitiessuchasmarketing,newproductdevelopment,finance,andcustomerservice.

Tobemorecompetitive,companiesarebuildinguptheirexpertiseandefficienciesintheprocessofdesigningandbuildingnewproductsandintheprocessofdeliveringandservicingexistingproducts.Companiesthatdevelopbettersupplychainmanagementskilllevelsareclearlybetterabletogainmoreprofitsfromthemarkettheyserve.

Theprocessesinvolvedinthedesigning,building,anddeliveringofproductstothecustomersthatneedthemhascometobereferredtoassupplychainmanagement.Noonecompanycandevelophighskilllevelsinallareasofsupplychainmanagementsocompaniesarefocusingondevelopingandbuildingtheirparticularstrengths,theircorecompetencies11.Companiesaredefiningtherolestheywanttoplayinthemarkettheyserveandlinkingupwithothercompaniesthathavecomplementaryskillsets.Thisisthemajordriveofthemodernsupplychains.

Supplychainsencompassthecompaniesandthebusinessactivitiesneededtodesign,make,deliver,anduseaproductorservice.Businessesdependontheirsupplychainstoprovidethemwithwhattheyneedtosurviveandthrive.Everybusinessfitsintooneormoresupplychainsandhasaroletoplayineachofthem.Thepaceofchangeandtheuncertaintyabouthowmarketswillevolvehasmadeitincreasinglyimportantforcompaniestobeawareofthesupplychainstheyparticipateinandtounderstandtherolesthattheyplay12.Thosecompaniesthatlearnhowtobuildandparticipateinstrongsupplychainswillhaveasubstantialcompetitiveadvantageintheirmarkets.

Theterm“supplychainmanagement”aroseinthelate1980sandcameintowidespreaduseinthe1990s.Priortothattime,businessesusedtermssuchas“Logistics”and“operationsmanagement”instead.Ifweacknowledgethatsupplychainmanagementissomethingwedotoinfluencethebehaviorofthesupplychainandgettheresultswewantthenwecanmakethisdefinition:

“Supplychainmanagementisthecoordinationofproduction,inventory,location,andtransportationamongtheparticipantsinasupplychaintoachievetheefficiencyforthemarketbeingserved.13”

Therefore,SupplyChainManagementisthemethodologytoimprovethebusinessefficiencyinfindingrawcomponentsforyourbusinessproductorserviceanddeliveringittothecustomer14.Itcontainsfivebasiccomponents:

Plan-Strategiesformanagingresourcestowardmeetingcustomerdemandforgoodsandservices.

Source-Selectionofsupplierstodelivermaterialsorservicesforthemakingofgoodsandservices.

Produce-makingofgoodsandservices,whichmayincludeproduction,testingandpackaging.

Deliver-Coordinateordersfromclients,carrierssendingproductsandreceivingpayments.

Return-Networkforreceivingdefectiveorexcessiveproductsfromclient.

Thegoalofsupplychainmanagementistoincreasesalesofgoodsandservicestothefinal,endusecustomerwhileatthesametimereducingbothinventoryandoperatingexpenses15.

BenefitsofEffectiveSupplyChainManagement

Effectivesupplychainmanagementisthekeytoacompetitivebusinessadvantage.

Theeightmajorbenefitstoeffectivesupplychainmanagementcanbesummarizedasfollows:

1.Improvedcustomerservice:

havingtherightproducts,availablefordeliverywhenrequested,atagoodprice.

2.Reductionofcostsacrossthesupplychainandmoreefficientmanagementofworkingcapital.

3.Moreefficientmanagementofrawmaterials,work-in-process,andfinishedgoodsinventory.

4.Increasedefficiencyinthetransactionsbetweensupplychainpartners