Supply Chain Performance Drivers - Supply Chain Management, Logistics Management | Logistics Management - B Com PDF Download

Supply Chain Performance Drivers
SCM consists of five drivers. Each of these drivers can be developed and managed to emphasize responsiveness or efficiency. As you investigate how a supply chain works, you learn about the demands it faces and the capabilities it needs to be successful.

The five drivers are illustrated below

1. Production – This driver can be made very responsive by building factories that have a lot of excess capacity and use flexible manufacturing techniques to produce a wide range of items. To be even more responsive, a company could do their production in many smaller plants that are close to major groups of customers so delivery times would be shorter. If efficiency is desirable, then a company can build factories with very little excess capacity and have those factories optimized for producing a limited range of items. Further efficiency can also be gained by centralizing production in large central plants.

2. Inventory – Responsiveness can be enhanced by stocking high levels of inventory for a wide range of products. Additional responsiveness can be gained by stocking products at many locations so as to have the inventory close to customers and available to them immediately. Economies of scale and cost savings can be gotten by stocking inventory in only a few central locations such as regional distribution centers (DCs).

3. Location/Warehousing – A location decision that emphasizes responsiveness would be one where a company establishes many locations that are close to its customer base. Efficiency can be achieved by aggregating its inventory to a central location.

4. Transportation – Responsiveness can be achieved by a transportation mode that is fast and flexible such as trucks and airplanes. Efficiency can be emphasized by transporting products in larger batches and doing it less often. The use of transportation modes such as ship, railroad, and pipelines can be very efficient.

5. Information – The power of this driver grows stronger each year as the technology for collecting and sharing information becomes more wide spread, easier to use, and less expensive. Information, much like money, is a very useful commodity because it can be applied directly to enhance the performance of the other four supply chain drivers. High levels of responsiveness can be achieved when companies collect and share accurate and timely data generated by the operations of the other four drivers.