The impact of effective supply chain design could impact organizational performance

OPS MANAGEMENT 2.5

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The impact of effective supply chain design could impact organizational performance

An effective supply chain design created good communication lines between players in the supply chain. This ensures that the activities of this major component of the organization’s operations flows smoothly and creates efficiency. The smooth flow of material needs into and through the supply chain is highly dependent on information that is timely and useful. Therefore, an effective design would make provisions for this important factor thus ensuring the supply chain contributes to the profitability of the overall organization.

Effective supply chain designs are intended to establish and maintain long-term work relationships between the supplier and their customers. In so doing, it is important to make sure that information flow is undeterred, the terms of service are spelt out clearly, and any bumps along the supply chain process are cleared that might otherwise distract the process of demand and supply of materials from both sides of the supply chain (Ivanov & Sokolov, 2010). If this is carefully factored in the design, the clients keep coming back thus creating return business and enhancing the firm’s business practice as well as boosting profitability.

Any effective supply chain that purports to contribute to the business in a positive manner has to be able to demonstrate its cost-cutting ability. Therefore, the importance of lowering costs incurred in the supply chain’s activities forms a major characteristic any effective supply chain should have as far as boosting profitability and improving stakeholder value goes. Some useful avenues the effective supply chain could use to achieve these objectives are transport efficiency improvements and inventory control methods that reduce wastage and reduce lead time.

Analysis of the supply chain networks and drivers of the supply chainSupply chain network is a compilation of actual physical locations, transportation equipment, supporting structures that a firm makes or markets are delivered to their bonafide owners. There are a number of such combinations that form the networks procurement professionals analyze when considering which is best suited for their firm.

The first behavior is characterized by a weak transport system. If the supply chain network has this kind of shortfall, transfer of inventory is slowed down and the effectiveness of the supply chain is compromised (Leeman, 2010). As a major component of any supply network, transport facilities form a major point of weakness and /or strength.

The second scenario is characteristic of a scenario where there is lack of. Due to the importance of this component, the supply chain would be seriously crippled if the information regarding what is needed, in what amounts, when, and using what methods lacked. Therefore, supply chains that find themselves weak in this regard usually end up raising the cost of the whole function, a situation that the very supply chain manager seeks to get rid of.

As such, the ideal supply chain should be one that optimizes the process of addressing mismatch and shortages within the firm. In order to do this, the costs should be kept to a minimum, inventory should be aligned with the initial needs, and transport processes should be timely such that inventory conforms to the JIT rule. The following flow chart puts this into perspective;

Fig 1. The effective supply chain design.

Drivers of the supply chain are the important factors that if manipulated, make or break the supply chain’s effectiveness. These are;

Inventory

This consists of raw materials, works in progress and finished item at any particular stage of the supply chain. The inventory arises from a mismatch between organizational demands and supply that necessitated the availing of the materials needed by a party that can do it efficiently. There are three types of inventory an effective supply chain design would consider. They are: cyclic inventory, seasonal inventory, and safety inventory.

Transportation

Transportation consists of equipment and processes aimed at enabling the transfer of inventory along the supply chain. The supply chain manager willing to maximize the effectiveness of his supply chain has to choose from the variety for a suitable mix that optimizes his functions. From this perspective, we can deduce that transport comes in various forms, like air transport, road transport, rail transport and sea transport.

Specialized facilities

These are the supportive infrastructure that together with the above two resources form the supply chain network. The supply chain network depends on a location to which the inventory is going, the capacity with which the supply chain acts to satisfy its customer, and the relevant information necessary to achieve functional effectiveness.

How supply chain impacts the chain of distribution

The supply chain provides a means for the distribution of commodities in order to cater for mismatch and inadequacies within the industry or manufacturing processes. The supply process becomes more responsive to the need of those facing shortages while enabling the timely delivery of assets and resources.

The availability of supply chain benefits from the availability of a common information resource pool from which different players can benefit. This enables players within the logistics and procurement fields to respond better to any needs with in their scope of operations reducing wastage and redundancy. The reduction in costs associated to such problems makes it easier to distribute assets and resources while making it possible to optimize operations.

The need for green operations can also be infused into the supply process using supply chain management. Through effective tracking processes enabled by SCM, we are able to establish the carbon footprint of a company’s operations and effect changes to make the distribution process more environment-friendly. Therefore, supply chain management enables the application of greener practices within the process of distribution of assets and resources.

Distribution of assets and resources is part of the greater functions in the materials handling part of any organization. In order to ensure that the best trends and methods are in use, supply chain management ensures that all processes associated with this business function are aligned with current business practices. This ensures the continued dynamism of the firm.

References

Genuine Financing. (n.d.). Supply Chain Management , [Graphics work]. Retrieved from http://www.genuinefinancing.com/2014/01/what-is-logistics-supply-chain.html

Ivanov, D., & Sokolov, B. V. (2010). Handling uncertainty in Supply chains. In Adaptive supply chain management (p. 81). London: Springer.

Leeman, J. (2010). Supplier relationship management. In Supply Chain Management: Fast, flexible supply chains in manufacturing and retailing (p. 69). Düsseldorf: Institute for Business Process Management.