Globalization has forced many businesses to revolutionize their business strategy. Many companies have developed a business model in response to the growing competition and demand called Supply Chain Management or SCM. The SCM is the essential part of any successful business today. It drives the companies to maximize productivity, save unnecessary expenditures and lower down time thereby enhancing their ability to compete in the ever increasing local and international competition.
The effectiveness of the supply chain management will help businesses in assessing their functions against their competitors and the top companies in the market, enabling them to identify the gap to improve their performance. The benefits of the improvement includes regularizing the number of suppliers; quality improvements; slashed lead times; inventory reductions; on-time deliveries; purchasing department cost saving; elimination of process errors; reduced planning and scheduling role and ultimately, reduced costs.
The first step of the supply chain process is to establish a comprehensive plan that reflects that company’s priorities and interests. Align the supply chain management system with strategic initiatives of the company. It is recommended to form a functional group within the business to plan, execute and manage the supply chain. The Group shall consist of the decision makers from various departments of the company and its partners. This will ensure the contribution from major areas of the business to enhance a better communication. The effectiveness of the supply chain group functioning depends on the strategy is sourcing, materials management, logistics, forecast and demand planning, contract management, inventory control, supplier/customer relationship and also to some extent involves corporate governance since the members of this group are the head of their respective areas.
Prepare a detailed list of customer-supplier data base to identify the best supply chain partner for the business. A successful collaborative strategic sourcing initiative not only ensures availability of supplies, but will result in streamlined processes, increased responsiveness and overall cost reduction. Assessing the strategic partners before entering into a deal is a critical factor. It requires input from all functional areas of a business such as finance and accounts, engineering, operations, marketing, maintenance, HSE, Quality assurance and other internal team members. Assessment in the form of certification, quality reviews and audits is the right practice for the effective partnership. Some businesses encourage the involvement their supply partners in their business processes in order to deliver the streamlined processes, improved products and reductions in costs. Always try to maintain a vibrant and healthy relationship with the suppliers, provide a platform for resolving any issues that may arise and actively involve the strategic partners in goals and objectives.
For a successful sourcing, the compliance of contractual terms is very significant. Initially, supply chain group negotiate potential savings during the sourcing process, but in most cases fail to realize these saving to the full extent due to the lack of communication within the organization. Earlier the contracts were dealt by finance or the legal departments inside the organization, but lately these are being handled by the supply chain there by ensuring the contracts are maintained in a central repository.
Since the suppliers are delivering according to the contractual terms, the supply chain group strives continuously to review the inventory and maintain the optimum levels. Holding huge inventory will reduce the working capital and is definitely a loss to any business. Vendor managed inventories (VMI) is an alternate scenario that may be feasible but very challenging. Supply chain should ensure the reduced lead times, fast delivery, smooth logistics etc. This requires more planning and forecasting on demand-supply ratios.
The data acquisition and retrieval is another important task of the supply chain management. A centralized data base is required for timely and accurate management of the entire supply chain process. Many businesses structure their processes based on the technology that they choose. For a successful business the technology should be based on the strategy that best suits the business needs.
