Unit 26-L.O.2 Evaluate the importance of effective supply chain management (SCM)

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Effective supply chain management is unequivocally crucial for the successful execution of most any company strategy. Supply Chain Management entails everything from procuring production materials to warehousing inventories, to the delivery and on-site assembly or installation of products for end-users. These activities have a direct impact on a company’s logistics costs and operational efficiency.

Therefore, it’s important that businesses with SCM systems in place maintain these systems as they grow more complex over time. The challenge faced by many businesses is identifying where this expansion needs to take place first – often without knowing how their supply chains will be structured in 2020 or 2030 at best-case projections.

Supply chain management:

Relationships with suppliers and logistic providers

The relationships suppliers and logistics providers have with supply chain management can be adversarial, collaborative, or competitive.

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For most companies, one of the main power struggles is over who controls supply chain decisions within a firm. Supply chain managers often want to control these decisions on behalf of their organizations.

Managing service sector supply chains vs managing manufacturing sector supply chains.

The challenges of managing your supply chain are different depending on whether you are in the service sector or manufacturing sector. The differences include:

Where the complexity is – Managing a supply chain for a service firm requires more planning as well as long-term management skills, and also being able to be flexible in assumptions about demand, etc.

Managing customers and meeting their needs efficiently and effectively to build a competitive infrastructure

When you build a competitive infrastructure with your current customers, it’s only natural to satisfy these needs. The customer experience is the most important part of any organization, but oftentimes companies get so wrapped up in their current industry that they don’t focus enough on marketing and growing to other markets.

The key here is to understand the needs of your existing clients or customers, and what would make them happy for the long term. In practice this means building a competitive infrastructure–customer goals should be aligned with company goals of profitability and expansion.

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Keep in mind that you can also help your business grow by taking down new avenues–think offshoots like consulting or web development rather than simply catering food products all year round. You’ll find that expansion to new markets is easier than it might seem, and you’ll also increase the number of clients you receive.

The benefits of effective SCM

In a nutshell, successful supply chain management benefits both the company and its customers by lowering operating costs and increasing customer satisfaction. Companies that excel in this area work toward providing their customers with on-time, accurate shipments while keeping expenditures to a minimum in order to maximize profits.

Supply chain managers often take responsibility for the decision-making process regarding shipping methods, warehousing expenses, inventory levels, etc., so it’s understandable how they can have such a dramatic effect on profit margins.


Developing procurement strategies, policies, and procedures

Developing procurement strategies, policies, and procedures is a vital part of any organization’s strategy. The elements that need to be considered range from pricing and negotiating supplier contracts, all the way through to ratification of invoices.

Here are some tips for beginning procurement professionals who want to get their business off the ground:

1) Spending limits – When you first go into business as a professional supplier, it can be tempting to take on every large order that comes your way. However, this ultimately prevents your company from getting established and reaching its full potential because you will end up working too hard with little reward for such a long period of time.

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2) Deliver on quality – Develop customer loyalty by offering high-quality goods and services. If your business is able to be contractually compliant, produce goods and services that meet or exceed clients’ expectations then you will have a customer for life.

3) Environmental considerations – Many large corporations are now requiring contractors to obtain environmental accreditation, especially in SOx, WEEE, and REACH areas, etc.

Consideration of demand management, forecasting, and planning.

Demand Management is the process of reducing the demand for a product or service during peak periods so that the supply will be adequate for periods when demand is higher.

Forecasting addresses an organization’s capability to develop and implement strategies to best forecast future customer demands, while Demand Planning includes forecasted sales, inventory levels, production requirements, and capacity available through forecasting processes.

So in short- yes it does. It helps with giving a business idea of how much they should make (or buy) before reaching or going over the amount needed at any given time.

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For example, if this company needs 400 items in total but there is only 100 left then we know that they need to find more stock before being sold out because once they reach 0 they will start losing money.

How it helps- this goes back to the forecasting process in which a company takes into account past data and future trends to create an accurate prediction of how many products or units are needed for consumers over a set period of time.

Supplier landscape analysis:

Cost/price – how much does it cost?

The cost of sourcing varies depending on how well the supply chain network is and depends on the procurement strategy.

The more hands-on you are, the higher the cost of the supplier because you have to use labor to go find suppliers.

The less hands-on, more automated a company is – including its supply chain network and procurement strategy – means that supplier costs can be lower.

If your business currently has a management team implementing a hands-on approach, there are systems out there right now to help companies automate their operations by utilizing software apps and integrating with ERP or other tech infrastructure in place.

Quality – what is the quality of the product?

Quality in Supply Chain Management refers to the products that are being ordered, shipped, and delivered. This means that there is a focus on meeting customer expectations and making sure the specs of the goods meet expectations.

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There are four types of quality measurement-

1.product quality

2.service quality

3.process quality

4.people quality.

All these work together to achieve customer satisfaction levels for an organization which could be either internal or external clients.

Information to include in this:

Product Quality is a measure of how well an organization meets its goals with regard to every product it delivers or sells.

Service Quality is analyzing the services offered by providers within market segments and determining whether they offer value.

Process Quality covers everything from raw materials through production, and from product delivery through installation, service, and disposal.

People Quality measures an organization’s abilities to attract, retain, and develop people with the skills needed to accomplish its goals.

Time – how long will it take to deliver?

This is a complicated question to address. All we can provide is the following estimation, as accurate as possible. We have based this estimation on cumulative volume and size of delivery in light of the complexities in our overseas operations.

Place – where is the supplier?

First of all, a supply chain is a system that connects the manufacturers who produce goods and provide raw materials to downstream businesses like wholesalers, suppliers, and retailers. In order to find your supplier, you will have to look through different records. You could start by looking for names or initials on packing slips or shipping invoices and then go online either in order to search through company databases or using databases like Dun & Bradstreet.

It might be quite difficult so I suggest that you hire an outside firm that specializes in data mining services such as Beltway Associates because they will be able to handle this type of job much easier than someone without those skills. Plus they charge less money too! Good luck!

Scale – can they meet anticipated future demand?

Supply Chain Management incorporates a number of different aspects, each contributing to a smoother process for short-term and long-term planning. The primary areas supply chain management covers are –

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1. Production Planning

2. Manufacturing Operations

3. Purchasing

4. Collaborative Inventory

5. Optimization Sales

6. Distribution Forecasting Transportation

Inventory has the direct link to other respective areas in the supply chain and it is critical that planned future demand will be met.

Usually, forecasting sales make up an inventory plan because anticipating customer demand before time helps in meeting future expectations without any obstacles in between.

Vendor relations:

Giving consideration to negotiations, contracts, and purchase orders.

It is important to remember that negotiating, contracts, and purchase orders are all business transactions. They are not personal but rather should be seen as a way of exchanging goods or services for a price agreed upon by both parties.

A contract could be considered an agreement between two entities in which one side agrees to provide something of value to the other side in exchange for some type of consideration from the other party.

Negotiations can include agreements about prices, quantities, delivery dates, and so on. The goal is to create an equitable arrangement where each party has something they want and needs at the end of the transaction.

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Purchase orders don’t have many legal implications but they do serve as written evidence that there was a negotiation around certain items being purchased with specific terms including the price and quantity. The purchase order is also a written account of the agreement that has been negotiated by both parties and it must be honored through the delivery of the purchased goods within the specified period of time.

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