Supply Chain Management
Supply chain management is a process that many people do not understand fully. It involves many different aspects of the purchasing and shipping of products.
Supply chain management involves the entire process of planning, implementing, and controlling supply chain operations. It is not just the process of order goods and receiving them into inventory, but making certain that they are shipped and delivered to customers in a timely fashion. That means that those in the procurement areas of each company are responsible for all aspects of goods movement beginning with the purchase requisition and ending with the delivery of finished goods to the customer. In the case of a manufacturing company, this process will also involve the procurement of the raw goods and work-in-process phase of the manufacturing process.
Without supply chain management, the process of delivering goods to the customers would likely not be such a controlled and efficient process. For the company delivering the goods, that means unhappy customers who will seek to find a new source for the goods that they need to run their own business. Each process within the supply chain must work with another one in order to reach the final goal of delivery to an end user. Unless each area works together as a team, the end results will be disastrous. None of the logistics processes is independent of the other; they must all work together in order for the operation to work at peak efficiency.
Procurement is possibly one of the most important phases of the supply chain process. After all, without a staff that is capable of locating sources of material and securing the best prices, the operation will fail miserably. Not only that, but one must be able to obtain the necessary materials at the best prices in order to make a profit off the sale of the goods. One of two benefits are derived from obtaining lower pricing for the same material: either you make a higher profit or you are able to give your customer a better price and thus stand a better chance that he will not seek a lower price from other suppliers.
Some companies use the procurement staff to search for good prices for office and other operational supplies. Depending upon the size of the company, there may be a separate person handling the two functions, or one person may handle procurement for both internal and external uses. No matter which way you look at it, the right price for internal and external goods has an effect on the company's profit either as a direct effect on profit or as an expense that affects net income. After all, not everything that goes into running a company directly impacts the work-in-process or raw goods that go into manufacturing, but they do affect the company's ability to produce those products and ship them to customers.
Most people think of logistics as the area of the supply chain that involves shipping the goods to the customer. Although that is partly true, it involves somewhat more than that. The function of the logistics management area is to not only assure prompt delivery to the customer, but to make sure that products are maintained and stored in an efficient manner until they are ready to be delivered to the customer. This includes not only finished goods that are not yet ready for shipping, but that of incoming materials that will later be used to in the manufacturing of finished goods.
Within a customer driven supply chain, it's important that each person responsible for the logistics area of the supply chain have the knowledge and ability to interact with other team members as part of the entire supply chain functionality. That means they must know the steps prior to the products arriving for storage until shipment, and they must also know what is going to happen with the goods after the leave the warehouse. Logistics management is only a small part of the supply chain management area, but it's an important part of the circle of functions within the supply chain itself. Without each individual team member working together, the efficiency of both the supply chain management and logistics management teams will both decrease.
Storage of goods is an important part of supply chain management, but it's important to understand that not every company that has products in a warehouse is a manufacturer of goods. Some companies do not have the room to store goods for their customers, so they contract another company who will store the goods and take care of the shipping when their customer is ready. In some cases, the contractor may even assist with the price procurement of new goods as well as receiving new goods into inventory and shipping others out of inventory. Though you may think that it would be more cost effective for a company to secure their own warehouse, for many companies, this is a more workable solution to storage needs. Since they leave shipping up to the company with which they contract, it also means they do not have to worry about securing a shipping company or concerning themselves with maintaining a fleet of delivery trucks.
One of the major package delivery services has a division that provides this exact service, and it works quite well for the customers that they service. It removes the responsibility from the customer to the supply chain management company who must provide the logistics management team to assure that the goods are stored, maintained, shipped, and delivered in an efficient manner according to the terms of their contract with the original customer.
Shipping is another part of the logistics area that is important to the smooth and efficient movement of goods within the supply chain. This phase involves procurement of shippers who can handle the shipments efficiently and at the lowest cost or the purchase of a fleet of delivery vehicles that are available to handle the workload. Even companies who have their own fleets of delivery trucks, vans, and tractor trailers usually keep a list of shippers on which they can call in case all of their trucks are in transit or they have maintenance issues with some of their fleet. Customers will understand a delay if a truck breaks down in transit – these things happen – but you can't expect your customer to wait because you don't have a truck available to deliver their products.
In order to assure that you can deliver products on time, it's important to have your own fleet in top mechanical condition as well as having a delivery company on stand by. If you are not interested in having your own fleet as many companies are not, make sure that you have enough sources for shipping, including those who are willing to provide services on an emergency basis if a last minute request is made. Some delivery services, especially trucking companies, absolutely insist on 24 or 48-hour notice, and your customer may not always be able to provide that.
The success of a company is contingent upon their ability to provide efficient and on-time delivery of goods to their customers. This is another area that falls under the expertise of the supply chain management team. Companies recognize the importance of this function and do not attempt to cut corners when it comes to providing efficient delivery services. On the same note, they also expect the same service from incoming products from their suppliers. It's a never-ending circle because suppliers must deliver on time in order for their customers to be able to provide the same service on the other end.
In reality, efficient and on-time delivery means that everyone in the supply chain must work together beginning with the provider of the raw goods. Even if you work as a warehousing/delivery service and receive only finished goods, someone in the supply chain makes the raw goods that are used to manufacture the finished goods that you store, ship, and deliver. Therefore, efficient delivery depends on those receiving goods before you making sure that they receive the most efficient delivery. In other words, a raw material may be manufactured in a laboratory, which delivers it to a manufacturing plant. They are responsible for creating a finished product that is either delivered to a customer or to someone who warehouses it for a customer until it is ready to be shipped.
The supply chain and logistics management groups are the roots of a company's profit-making business. It doesn't matter whether it's incoming inventory or outgoing finished products—both functions have an impact on how much of a profit the company is going to make and how many customers they are going to maintain over the years. Customers are not as loyal as they were many years ago, so they will not maintain relationships with a company that is unable to provide products on a consistently high quality basis. The competition today is stiffer than it has been at any time in the history of our economy, and suppliers need to recognize that in order to keep their customers happy.
It is no longer possible to continually delay delivery to your customers or ship inferior products and expect them to be happy if you agree to refund their money or reship the product. It's time lost if they have to wait for you to reship or remanufacture an inferior product, and though customers understand occasional errors, it cannot continue. The supply chain is overworked enough shipping products the first time; if you add to that with an enormous amount of reships, it can cause a break down in the efficiency of both supply chain and logistics areas.
For those who work in the supply chain and logistics industries, the best thing they can do is learn the system their company operates completely. That means knowing exactly how their particular operation works before you attempt to make any decisions on your own. You have to remember that this is the bread and butter of your company, that which pays your salary, so you can't take a chance of causing your company any loss of income by failing to know exactly what you should be doing. Even you are experienced in the areas of supply chain management or logistics management, you must remember that each company operates in a different way.
Do not attempt to run the new company like you did a previous company for which you worked because the operation is going to be different. No two companies work alike, and that is because no two operations are exactly alike. That doesn't mean that you can't make suggestions, but it's important that everyone work as a team, and if you are not doing things in the same way that others are, it causes a breakdown in efficiency. Remember, someone has tried and tested the system for your company and thus created the one that works best. Always follow the rules set by those with more experience until you are in a position to make suggestions.
Supply chain management is the most important function of a company who has the responsibility of shipping goods or product. It's important that each person be able to function as a team and work together in order to assure that both supply chain and logistics functions are working at peak efficiency. Though logistics involves more storage and shipping, they are still an important part of the entire supply chain management functionality, and require the same amount of efficiency, if not more so. After all, delivery to customers is what creates profit for the company, and this is directly affected by the efficiency of warehousing, shipping and delivery.
The efficiency of supply chain management will have a positive or negative effect on the success of a business, and as such, it's important to keep everything running as smoothly as possible. Teamwork within the entire supply chain area is the only thing that is going to assure that a successful operation culminates from the time of procurement to the time of delivery to the customer at the other end. It's also important that the same efficiency precede delivery of any goods from suppliers – any delays from suppliers will create a delay in the entire operation and cause a breakdown of efficiency within the supply chain management area.