Abstract
Businesses’ supply chain management department coordinates all the activities and players, from idea creation to the finished consumer goods in the market. The report will analyze supply chain management (SCM) globally by defining it and analyzing steps in the SCM, models, importance, and some of the challenges. The report will use a scooping review technique to research and analyze the paper.
The findings of this study show that SCM reduces business costs and enhances customer experience. Various businesses use supply chain models such as continuous flow, agile, or custom configured. Poor SCM may cause costly delays and wastage in business. The report concludes by summarizing the content of the work.
Introduction
Every business begins with an idea, after which the thoughts are converted to a tangible commodity, project, or service. All the processes involve different players, such as suppliers, and various activities, including distribution, which are appropriately managed. Supply chain management (SCM), therefore, refers to converting a business idea into a ready consumer product by gathering the necessary raw materials, storing finished commodities, and distributing them to the target customers in the market. SCM helps to reduce the overall operational cost of a business.
Literature Review
Much study has been done regarding supply chain efficiency; however, there is limited research on its effects on the operating costs of a business. Businesses have been doing all they can to reduce the cost of operation, and one of the essential segments to check on is the supply chain. This is because it was found that businesses with inconsistent supply chains mainly suffer from customer endurance and high supply chain costs. Businesses use different methods to reduce the overall supply chain cost by improving time, merging orders, and transparent market segmentation (Alshurideh et al., 2022). Others have centralized their distribution center to ensure all their orders are controlled from one point.
Many companies aim to deliver products to their consumers at the most reasonable prices. It is one of the strategies they use to become more competitive in the market and have the edge over their competitors. Alshurideh et al. (2022) found that supply chains affect 55% of a product’s total cost, which shows that knowledge of supply chain management is essential for any organization.
Different authors have analyzed various opponents of the supply chain, which helps reduce the cost of price, including transportation, inventory, information, warehousing, order processing, and packaging. Rahmanzadeh et al. (2022) found that transportation is the costliest part of supply chain management. Another study reveals that using the Holger Clasen Company’s supply chain can help to reduce the overall supply chain cost. This study will evaluate and present the elements of supply chain management and determine which reduces operating costs.
How SCM Work
A business operation involves various activities such as producing, storing, and distributing finished products to consumers. Several factors affect the activities, including government, environmental conditions, and fuel prices. Therefore, it is necessary to properly coordinate the players, including suppliers, manufacturing processes, retailers, distributors, and consumers, as they interact through the production, sales, and buying process (Alshurideh et al., 2022). A company’s supply chain management department thus is responsible for coordinating all the processes by linking players in the various stages to ensure the product is efficiently delivered to the customers while minimizing cost at every step.
Firms operating in the global market depend on various players before they reach the target customers with their commodities. In the same way, they require information on the market to satisfy the interest of the consumers; similarly, they need distribution channels to deliver the products to customers. Since the consumers can’t access products from the producers directly, there is a need to have agents in the form of retailers to connect and hold the commodities for the customers in their respective locations (Han et al., 2022).
A company cannot do all the activities and thus must coordinate with other firms to perform some duties to ensure the products reach the targeted consumers at the right time. Firms have supply chain management to coordinate the activities and players, manage costs at every stage, and ensure customer satisfaction.
Models in the Supply Chain Management
Since businesses are different, a firm must use the correct model in the global supply chain. The model depends on the nature and type of business activity. Wrong choices may affect the organizational process and the objective by exposing the firm to many risks, increasing the risks, and spoiling the business’s reputation (Rahmanzadeh et al., 2022). A firm must, therefore, be keen to choose the most cost-effective supply chain, especially those operating in the global market. The following are models in supply chain management which a business can choose from:
Continuous Flow
From the name, the model is continuous and conducted on both ends of the operation, production, and purchase. Businesses engaging in the model must be stable and have homogenous products and services. In addition, the products must be in continuous flow during production and consumption, not seasonal services or commodities whose needs wither with time (Rahmanzadeh et al., 2022). For example, the model is best suited for Adidas Company since its products are consumed consistently, and thus, the production and purchase are continuously running.
Fast Chain
Unlike the continuous chain, this model suits firms dealing with products with short life cycles. The model is based on the current business trends, thus requiring commodities and services motivated by trends—for instance, flowers during Valentine’s season. A firm would apply the model to maximize profit from selling flowers at Valentine’s (Han et al., 2022). Once the Valentine season is over, the products become obsolete. Even though it depends on current trends, it is the model for the supply chain.
Efficient Chain
In the global market, where competition is stiff, businesses need efficiency to access the consumer first. Firms use the model to maximize efficiency and gain a competitive advantage. The model facilitates organizations in organizing their operations by forecasting production and appropriately preparing machinery and raw materials (Putro et al., 2022). One challenge synonymous with the model is that disruption at one stage of operation can affect all activities in the supply chain network. For instance, if a firm experiences a labor shortage, it may cause a delay in supply, thus leading to additional costs.
Agile
The model applies to firms dealing in fragile products or commodities that require special attention. Since the product requires special services, the supply chain network will adapt to the product. For example, a company dealing in processed foods may require services such as refrigeration in the distribution chain to keep the products safe (Seuring et al., 2022). Firms using the model usually incur extra for special services and thus charge premium prices.
Customer-Configured
The model is a mixture of agile and continuous flow techniques, where the commodities involved are fragile and are continuous flow, thus operating on an end-to-end basis. The supply chain technique needs custom setups in the early phases of production, assembly, and manufacturing (Tan & Sidhu,2022). The model is suitable for firms that manufacture small batches. Compared to other techniques, the model is more expensive as companies incur additional costs in setting them up.
Flexible
The model is adjustable and can apply to every type of demand according to the season. It can be engaged during peak season when the demand is high and will immediately adjust to a low period when the demand is down (Richey et al., 2022). The model requires the right human resources, knowledge, and supply chain management software supported by functional technology to work smoothly. It can be used by both small and large firms with the presence of the right team.
Steps in the Supply Chain
Sourcing of Raw Material
After formulating a business idea, a firm must source raw materials to manufacture the product or service. Since most companies do not own raw materials, an enterprise must look for suppliers (Rahmanzadeh et al., 2022). For example, Nike Company’s athletic wear production depends on external and foreign suppliers for raw materials. Thus, the firm must coordinate with the suppliers for the raw materials.
Refining Raw Materials
Upon sourcing the raw materials, they must be refined and made ready for the manufacturing process. For example, in the case of Nike Company, the firm sources raw materials such as skins and hide, which cannot be used in making athletic products (Putro et al., 2022). Therefore, the enterprise must refine the skins and hides into the leather to make shoes. Similarly, cotton as a raw material must be refined before it becomes ready for making sports clothes.
Manufacturing Process
Refers to the phase where the refined raw materials are converted to products. This is the stage where the idea is converted into practice. Before the manufacturing stage, the commodity cannot be taken to the consumer in the initial state (Richey et al., 2022). However, following a combination of the essential parts of the refined raw materials, the product becomes finished and in a consumable state, ready for customers to use.
Storage
Storage is essential in business as it provides time for a firm to look for customers. Since production is usually a continuous process, holding the finished products before reaching consumers is necessary. During the storage stage, a company links with the consumers and organizes the delivery of the process (Han et al., 2022). Similarly, proper storage allows a firm to connect with retailers and other sales agents.
Order Fulfillment
Depending on the nature of the product, a company will identify the market, conduct research, and link with the customers. At this stage, a firm can receive consumer orders and assess them accordingly (Han et al., 2022). In the case of global companies, including Samsung, some consumers can be far away; thus, a firm must organize how to deliver the product to their respective locations.
Product Delivery and Follow-Up
Delivery is an essential phase in supply chain management. After receiving consumer orders, the SCM department must evaluate the best possible means for the product to reach the customers. The delivery means must be safe and efficient to satisfy the customer. Customers usually want to be served on time (Richey et al., 2022). In addition, the delivery process ensures products reach retailers on time. After delivering the goods to consumers, the SCM department traces them to assess their satisfaction.
Importance of SCM
Improves Customer Experience
For customer satisfaction, the correct quantity of ordered products must be delivered on time. Effective customer service reduces the service cost by reducing the value-added waste and enhancing customer service, encouraging repurchases (Han et al., 2022). Consumers want the goods to be available at their location. For example, customers in China expect to find Mercedes automobiles in their market whenever needed, and their satisfaction will diminish if they lack the product (Han et al., 2022). Similarly, time is another important factor considered by consumers. If a good is delivered late, the satisfaction level reduces. For example, Valentine’s flowers delivered on February 15th are late and do not satisfy customers’ needs.
Reduces Operating Cost
Efficiency in every stage of the supply chain reduces operating costs. Delivering the raw materials on time for production reduces the cost caused by delay. Similarly, delivering finished products from retailers to consumers reduces inventory costs. For example, food products may spoil if stored in a retail store for a long, leading to wastage (Han et al., 2022). In addition, supply chain management enables manufacturers and retailers to link with consumers cheaply. For example, supply chain management allows the Toyota Company to link with consumers in South America without the company having to visit the place.
Challenges
Even though supply chain management is managed correctly, a firm may incur high wastage if it fails to accurately assess the demand and supply, which leads to overproduction. Poor supply chain management may lead to overproduction or underproduction, causing inconvenience (Richey et al., 2022). In addition, poor management of the supply chain can lead to the loss of some goods, delaying the entire supply chain process
Conclusion
SCM is the process of coordinating different business players and activities to satisfy consumers. The SCM begins with idea creation until the product reaches consumers at their respective locations. Supply chain management is essential as it boosts customer experience, reduces costs, and improves a company’s financial position by increasing cash flow and profit leverage. When poorly managed, the supply chain can cause problems such as wastage, shortage, and delay in the entire supply chain.
References
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