Managing Supply Chain & Measuring Performance - Supply Chain Management, E-Commerce | E-Commerce - B Com PDF Download

MANAGING SUPPLY CHAIN

Traditional Supply Chain : The traditional supply chain often includes more than one company in a series of supplier-customer relationships. It is often defined as the series of links and shared processes that involve all activities from the acquisition of raw materials to the delivery of finished goods to the end consumer. Raw materials enter into a manufacturing organization via a supply system and are transformed into finished goods. The finished goods are then supplied to customers through a distribution system. Generally several companies are linked together in this process, each adding value to the product as it moves through the supply chain. Effective supply chain management is the act of optimizing all activities throughout the supply chain, and it is the key to a competitive business advantage. Consequently, an organization’s ability to gain a competitive advantage is heavily dependent on coordination and collaboration with its supply chain partners. Yet, even today, a typical supply chain is too often a sequence of disconnected activities, both within and outside of the organization. To remedy this situation, it is important that an organization and its suppliers, manufacturers, customers, and other third-party providers engage in joint strategic planning and operational execution with an eye to minimizing cost and maximizing value across the entire supply chain.

Exchanging Data is Critical : The underlying enabler of supply chain integration is the fast and timely exchange of information between supply chain partners. This information may take the form of transactional documents such as purchase orders, ship notices, and invoices, as well as planning-related documents like demand forecasts, production plans and inventory reports. It is this sharing and coordination of information and planning activities that can enable cost reduction, value enhancement, and the execution of advanced collaborative planning activities. In the past, the cost and complexity of executing electronic data interchange (EDI) transactions made this type of information exchange suitable for only the largest corporations. The ubiquity of Internet-based communication tools now makes it possible for organizations of all sizes to exchange information. However, challenges still exist and being able to successfully deal with all the new technologies is one of these challenges. The good news is that this data exchange challenge can be overcome; and the opportunities become endless once companies are able to exchange information efficiently with their suppliers, customers, and partners. Applications like vendormanaged inventory (VMI), collaborative planning, e-procurement, shipment tracking and tracing, electronic order management, and bill presentment and payment can be built  upon a core data exchange platform, enabling companies to reap true cost reduction and service improvement within their organization.

A supply-chain encompasses all activities and information flows necessary for the transformation of goods from the origin of the raw material to when the product is finally consumed or discarded. This typically involves distribution of product from the supplier to the manufacturer to the wholesaler to the retailer and to the final consumer, otherwise known as nodes in the supply-chain.      The transformation of product from node to node includes activities such as production planning, purchasing, materials management, distribution, customer service and forecasting.

While each firm can be competitive through improvements to its internal practices, ultimately the ability to do business effectively depends on the efficient functioning of  the entire supply-chain. For example, a wholesaler’s inability to adequately maintain inventory control or respond to sudden changes in demand for stock may mean that a retailer cannot meet final consumer demand. Conversely, poor sales data from retailers may result in inadequate forecasting of manufacturing requirements.

However, it is not simply about passing information from one node in the supply-chain to the next. The dispatch and distribution functions need to work effectively as well, so movement of product from one node to another happens in a timely manner and meets production scheduling.

All that said, there can be little point trying to improve your bottom line through transforming your own business without similar changes to the way your supply chain as a whole is functioning. That is, there needs to be consistency between individual  business objectives and the objectives of the supply-chain, and access to information in order to provide visibility of data flows.

Collaboration : Technology solutions can support greater data visibility and integration of dispatch and distribution with production scheduling. However, one element that underpins management of the supply-chain is collaboration.

Collaboration means firms share information in an accurate and timely manner so all businesses in the supply-chain can adequately plan forward inputs and outputs, dispatch product, manage risk and maximize return on investment. This improves the overall functioning of the supply-chain and ultimately the individual firm’s bottom line.  The key to collaboration is communication and the key to better communication is electronic transfer of information.

MEASURING A SUPPLY CHAIN’S PERFORMANCE

The performance of a supply chain is evaluated by how it reduces cost or increases value. SCM performance monitoring is important; in many industries, the supply chain represents roughly 75 percent of the operating budget expense. Three common measures of performance are used when evaluating SCM performance:

•  Efficiency focuses on minimizing cost by decreasing the inventory investment or value relative to the cost of goods sold. An efficient firm is therefore one with a higher inventory turnover or fewer weeks’ worth of inventory on hand.
• Responsiveness focuses on reduction in both inventory costs and missed sales that comes with a faster, more flexible supply chain. A responsive firm is proficient in an uncertain market environment, because it can quickly adjust production to  meet demand.
• Effectiveness of the supply chain relates to the degree to which the supply chain creates value for the customer. Effectiveness-focused supply chains are called “value chains” because they focus more on creating customer value than reducing costs and improving productivity.

To examine the effect of the Internet and electronic commerce on the supply chain is to examine the impact the Internet has on the efficiency, responsiveness, effectiveness, and overall performance of the supply chain.