What is the supply chain management and why is it important

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the supply chain management
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  • The Supply Chain Management:

Overview of Supply chain analytics:

Supply chain analytics is a combination of data analytics into supply chain management.

Supply chain management is one of the most important aspects of business nowadays.

We know some of the popular names of Fortune 500 companies like:

  • Walmart,
  • Dell and
  • 7 11 etc.. from Japan
  • Alibaba  from China 

These companies are known because of their supply chain competence.

Nowadays it is believed that the supply chain is one such area in the organization,

which can provide a lot of competitive advantage to a particular organization.

If you go to the website of Harvard publishing you will find maximum cases in the area of supply chain management.

Many of us feel that supply chain management which was once upon a time considered to be a subset of operations management. 

Nowadays the situation is almost reversed the supply chain has become an umbrella term.

And operation management has become a subset of supply chain management.

Therefore the course on supply chain management and using the data analytics technique into supply chain management.

So that name has come supply chain analytics.

There are different ways in which we can study the supply-chain.

We learn the topic in this article are in the following manner:

  • What is the importance of various types of flows in supply chain management?
  • What are the different decision phases in the supply chain?
  • Important examples that make supply chains so popular.
  • Then we learned the strategic aspect of supply chain management.

How can we achieve that strategic fit with respect to the supply chain management and the competitive strategy of the organization?

We will see how supply chain management has become the use of data analytics and particularly the present form of supply chain management. 

Where most of the decisions we are taking with the help of real-time data.

What is the supply chain?

It will be very relevant for us to understand the real meaning of supply chain and 

  • What does it mean?
  • What are the meanings of supply chain management? 

As we can see the supply chain involves all the stages in the fulfillment of the requirement of the customer.

And these stages may include factors are in the following manner:

  • Suppliers,
  • Transporters,
  • Warehouses,
  • Retailers and 
  • Customer.

It is very important to understand all the time.

Emphasizing all through this course that customer is a very much integral part of the supply chain all the time.

To ensure that customer is always considered whenever we are taking a decision related to supply chain management.

Whenever we are thinking of supply chain management.

So the customer is always an integral part of supply chain management.

Many a time we feel that up to retainer is our supply chain and customer is not the part of supply chain management.

The role of the supply chain is the integration of demand and supply this is very important.

Demand derives from the customer side.

And supply comes from manufacturers, suppliers, transporters, warehouses, and retailers.

They all help us in fulfilling the demand of the customer so proper integration of demand and supply.

That is very much necessary for customer satisfaction as well as for the profitability of the service providers.

So, therefore, the importance of this subject is becoming more and more in the coming competitive times.

Within each company the supply chain includes all functions involving:

  • Product development,
  • Marketing operations, 
  • Distribution, 
  • Finance, 
  • Customers, 
  • Service after-sales services etc.,

Many of us may feel that supply chain management is more related to operations management.

But if we talk in a very holistic manner nowadays it is no longer specific to operations rather it is a more holistic concept.

And we require equal involvement of product development, marketing, distribution, finance, and after-sales services in achieving the objectives of supply chain management.

It is the integration of demand and supply.

So the demand side information the demand-side data is normally captured by the marketing people.

On the basis of that data or that information the product development team of the operations team.

To develop new products, they ensure the supply of those products to the customers.

And then further wherever the customer is ensuring the supply to that very place is the responsibility of the distribution team.

It is very important that the scope of supply chain management be understood in a wider perspective just not limited to the operation.

Supply chain management has all three verticals of decision making.

It is deal at the:

  • Strategic level 
  • Tactical level and 
  • The execution level also 

Because of the involvement of almost all the functions.

Above mentioned that customer is very much an integral part of the supply chain.

And the supply chain includes the movement of products from suppliers.

With increasing competition, it is more appropriate nowadays to say that the supply chain is now changing into the form of a supply network.

Because when we think of a chain it is linear, but actually it is no longer a linear system.

You have many important players at each of those locations and there may be a crisscross at each of those stations.

Therefore it is more appropriate to say that the supply chain is now becoming a supply network or supply wave.

the supply chain management
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  • There are some of the generic types of supply chains: 

Where you can see that in a very conventional type of normal supply chain.

Which we all know there is a manufacturer, the manufacturer is producing the goods.

These type of goods are coming to a wholesaler.

A wholesaler is distributing to a large number of retailers in the market.

And those products are coming to the customer.

This is a very conventional type of supply chain.

  • We all have used this type of supply chain but nowadays there are supply chains:

Where wholesalers are not there you have large retail houses like Big Bazaar, Reliance chains, or Walmart’s.

Probably wholesalers are not there and the manufacturer directly supplying these products through a retailer.

Those big retailers are directly supplying these products to the customers and end users.

And then there are supply chains where the manufacturer is directly distributing products to the customer.

For example, BHEL 

BHEL is the manufacturer and the customers are State Electricity Board.

If BHEL is making a turbine. So there is no wholesaler no retailer in between.

And in that supply chain, BHEL is directly distributing those products to the customers, i.e end customers.

So depending upon your product to product, nature, the unit cost and so many other factors you may have a variety of supply chains.

These are some of the generic types of supply chain and the suitability of this supply chain depends upon.

 The type of products,

The type of customers and

The type of intermediaries you require.

Above mentioned very linear kind of arrangements. The situation is like this where you have a manufacturer. But many wholesalers many retailers are there.

And these wholesalers and retailers are making a network kind of situation. 

In the present environment, we say that the supply chain network is more appropriate than simply the supply chain.

Nowadays the competition is not between one organization to another organization.

It is not correct to say that Maruti in India is competing with Tata Motors rather,

it is more appropriate to say that the supply chain of Maruti is competing with the supply chain of Tata Motors.

So one supply chain competes with another supply chain and therefore for the success of the organization,

It is very important that we develop the competence of the entire supply chain.

It is not the competence of a single organization.

If Apple is competing with Samsung so it is not apple and Samsung directly.

But it is the result of the entire supply chain of Apple which is competing with the entire supply chain of Samsung.

Because a lot of wholesalers retailers and there are large numbers of players.

Then only this competition is taking place between one supply chain.

the supply chain management
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Now coming to a very specific example of a supply chain where some customer is going to purchase. 

Some detergent at a Big Bazaar mall supermarket.

Let’s learned how things are happening in this real supply chain.

Now, this is an example of a real supply chain.

In this particular case, you see a customer is coming to the Big Bazaar to purchase the detergent.

And Big Bazaar is keeping that detergent. Now, how many different parties are involved in this entire process?

Big Bazaar is procuring the detergent from Procter & Gamble.

Proctor & Gamble is manufacturing the detergent or any other manufacturer which is manufacturing the detergent.

It requires the plastic producer,

It requires packaging,

It requires a chemical manufacturer.

The plastic producer is further requiring the supplier like a chemical manufacturer.

To get the plastic granules.

Packaging supplier requires timber industry and paper manufacturer.

The paper manufacturer is the supplier to the packaging industry.

And the paper industry requires the timber industry.

And then again this chemical manufacturer is required for making the detergent.

So now you see to get a product like detergent from the Big Bazaar.

And which is manufactured by some manufacturers like P&G and someone like that.

You have even timber industry in that supply chain.

For a normal customer, it is very difficult to realize that the detergent which I am purchasing from a big Bazaar mall.

It is actually originating the supply chain from the timber manufacturer or timber industry.

But when you see in a very holistic manner you will find that this entire supply chain is there.

So just to give you an idea that how real supply chain a supplied network looks like so.

You don’t have only a single supplier here rather you have a variety of suppliers.

Who supplying different types of components, raw materials to Procter&Gamble.

And then it is going to make the final product and finally, you get a packet of detergent at the Big Bazaar or a mall. 

There are so many individuals to whom we need to manage.

Therefore this management can provide very important competitiveness to the organization.

Normally in our day-to-day discussion are more concerned about the flow of product in the supply chain.

Like the above mentioned important elements, we discuss it now.

the supply chain management
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Three important elements i.e

  • Information,
  • Products and
  • Funds

Information:

The primary thing which flows in the supply chain that is the product. 

And product flows from the manufacturer side to the customer side.

Nowadays because of environmental issues and so many other cost-related issues, a lot of products also flow in the reverse direction also.

For example, LPG cylinders 

So filled LPG cylinders flow from the manufacturer to the customers.

But empty cylinders flow from the customer to the manufacturer for refilling.

You have glass bottles of Pepsi coke the filled in bottles flow from manufacturer to the customer.

But the empty bottles flow from the customer to the manufacturer’s side.

So and in pharma, in FMCG and in a variety of these organizations you have expired products also.

Expired products flow from the customer side to the manufacturer side for proper disposal.

Information is also very important information related to product availability flows from the manufacturer side to the customer side.

But information related to:

What types of products are required?

In how much quantity these products are required?

That type of information flows from the customer side to the manufacturer side.

Products:

  • New products can be developed.
  • Accordingly, designs can be changed.
  • Accordingly, quantities can be adjusted.

For all those things this information flows in both the directions.

Funds:

Funds that is the third important flow that is there in the supply chain.

Normally the flow of funds the source of that is the customer.

Customer is the only positive source of cash flow or front flow in this supply chain.

But when reverse logistics, products going from the customer side to the manufacturer side.

In that case, the funds may flow from that left side to the right side also 

Information, product, and funds are in both these directions.

But one thing is very important to the flow of information is independent.

While the flow of product and funds are related to the direction of the flow of products.

And funds are always opposite to each other if products are flowing left to right.

In that case, funds will flow right to left.

And if products are flowing right to left in that case funds will flow left to right.

The flow of information is independent it can flow independently in both the direction.

So that is about three important flows in the supply chain. 

Normally most of our cost related diseases are linked with the flow of products that how the flow of products is taking place in your supply chain.

But at the same time when we are talking of supply chain analytics, the flow of information is equally important.

Because nowadays we are moving for real-time decision making of the supply chain.

And for that purpose, the efficient flow of information efficient flow of data is important in this particular case.

So that our decision-making becomes more efficient more useful helping the supply chain and helping ultimately the objectives of the organization.

  • What are the objectives of a modern-day supply chain? 

Modern-day supply chain the objectives are in the following manner:

To maximize the value which we are creating in the supply chain.

 The supply chain value is actually the difference between:

What the final product which we are offering to customers is worth and the customer is giving how much for that.

This value can directly relate to the profitability of the supply chain.

Once the product leaves the manufacturer and it reaches wholesalers, retailers and to the customer

The value addition is taking place.

But here the value addition is because of marketing and logistics activities.

So we need to see that finally when the product is reached in the hand of the customers.

What is the value the product has acquired and how much customer is paying for that value and we want to actually maximize this difference?

That difference is actually the profitability of the organization.

So it is very important to understand that we need to do value addition.

But for that value addition how much customer is ready to pay.

If you do excess value addition and for which it is difficult to get money out of the customers pocket.

Then your profitability will be certainly under the question mark?

You need to see that you don’t waste your resources on those things.

Where you do not significant value and therefore the

concepts will help us in achieving that objective.

The supply chain profitability is total profit to be shared across the various stages of the supply chain.

Now it is also very important to understand that when we are talking of the supply chain so we are talking of total profit.

And that total profit is shared among all the supply chain partners all the stages.

Supply chain success should be measured by total supply chain profitability and not the profit of an individual stage

As soon as we start off an individual stage the very objective of the supply chain the very objective of working together is defeated. 

Then the purpose of the competing with supply chain competing with the supply network will be lost.

All the time we need to keep this in mind and later on with the help of some data and some kind of modeling exercises.

We are talking in totality is always more than we talk of profit at the individual stage.

So it is not alike a preaching statement it can be proved with the help of some kind of quantitative data.

  • Conclusion:

To discuss what is the supply chain and how we need to do business in a supply chain environment with the help of coordination, all entities working together.

And not to think for individual supply chain individual gains or individual profits.

It is a business with the help of coordination with the help of cooperation of all the members of the supply chain.

 And therefore the success of the supply chain lies in the coordination supply chain success lies in trusting each other.

In the above manner describe the fundamentals of supply chain management.




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