Students of business and management often ask about the supply chain to understand the logistics and operations behind the manufacture and distribution of the company's products. In the simplest terms, its management and regulation fall under this subject, so let us first understand it in detail.
An organization that manufactures or develops a product or service has to transport this final product to the customer. The production process, the distribution process, and the management of the network of sellers and distributors fall under supply chain management. Its benefits involve getting better deals from the suppliers in the form of trade discounts, and also a general improvement in the relationship with them.
The simplest definition that can be found anywhere is: "The control of materials, information, and finances as they move in the process from supplier to manufacturer to wholesaler to retailer to customer." This entire network is known as the supply chain, and each party that receives the product and then carries it on does add some value to it and derive some kind of utility from it. The act of ensuring that all parties receive maximum utility and benefits in the movement of these various forces is what it means in real terms.
There are primarily three elements that constitute this process, and any individual or organization looking to follow the best practices should keep them in mind. Focusing on each of these elements, in order to combine them and deliver the best possible customer service, is the ultimate aim of this process.
This channel of management implies that the product must be in demand. To create a product and not generate demand for it is a useless venture, as it is this demand that ultimately starts the entire manufacturing process. Ensuring that the product reaches the customer in a timely, accessible, and quick manner is one of the key elements. Any delay in this process will lead to a loss of business.
For a customer to demand a product, its information must reach him first. Demand can only be generated in a customer if he is aware of its existence in the first place. The information flow also involves the different channel partners, communicating various needs and data among themselves, in order to enhance the ultimate goal of customer satisfaction.
The finances involved in the supply chain also play a major role. As the product passes from one subsequent stage to another, the mode and terms of payment must be clear. There are a lot of credit terms and conditions that can be applied in order to get the best possible deals from suppliers, and these can only be increased further by building up strong relationships with them.
The importance of effective management lies in achieving more accurate information and the ability to carry out better sales forecasting. The following factors are some more reasons for why this practice is so important and crucial for strategic planning and for the success of a business:
- It helps to build stronger partnerships and networks of suppliers.
- It helps to balance out the forces of demand and supply and then act accordingly.
- It helps to formulate better working strategies and business plans.
- It helps to forecast the transportation needs and requirements.
- It helps to plan the daily operations and logistics of the company.
- It aids in better and smoother inventory management.
- Lastly, it helps in shortening the supply chain by removing unnecessary elements. This makes the products reach the end customer faster.
Following are the five different stages involved in this process:
- Plan: The entire process must be planned out with the primary goal of the organization in mind.
- Develop: The potential suppliers are then contracted, and conditions of delivery, payment, and transportation are then finalized with them.
- Make: The product is finally manufactured, tested, and packaged and then launched into the market.
- Deliver: This involves the transportation of the product through various channels into the hands of the ultimate customer.
- Return: Customer queries and complaints are handled subsequently. If there are any defective items present, they are returned to sender.
Every manufacturer needs to implement this effectively, in order to get his products to do well in the market. A company that has a faulty supply chain will eventually fall behind in the race for market share. So, its management is what covers a number of operations and processes, and its importance must not be undermined or overlooked in any manner.