Supply Chain Management – Definition and Importance
Definition
If you’re in Supermarket and pick up the shelf from electronics and white goods and look at the labels. The chances are that you will find them having been manufactured in China or Mexico. The coffee pods you buy to use for your everyday use come from Africa. (No.1 Institute For Logistics and Supply Chain Management In Kochi Kerala)Computers have been shipped out of South American Factories. Soft furnishings on the shelves are from India and Hong Kong.
Global markets expanding beyond borders. Redefining the way demand and supplies are managed. Global companies driven by markets across continents. To keep the cost of manufacturing down, they are looking for production centres. Where the cost of raw materials and labour is cheap.
Sourcing of raw materials and vendors to supply the right quality, and quantity. The right price calls for a dynamic procurement strategy spanning across countries.
With the above scenario, you find companies procuring materials globally from various vendors to supply raw materials to their factories situated on different continents. The finished goods out of these different factory locations then pass through various chains of distribution networks involving warehouses, exports to different countries or local markets, distributors, retailers and finally to the end customer.
Managing all of the above activities in tandem to manage demand. Supply on a global scale is Supply Chain Management. As per definition, SCM is the management of a network of all business processes and activities involving procurement of raw materials, manufacturing and distribution management of Finished Goods. SCM known as the art of management of providing the Right Product, At the Right Time, Right Place and at the Right Cost to the Customer.
Why SCM strategy is important for an Organization
Supply Chain Strategies are the critical backbone of Business Organizations today. Effective Market coverage, Availability of Products at locations that hold the key to revenue recognition depends upon the effectiveness of the Supply Chain Strategy rolled out.
Very simply stated, when a product introduced in the market and advertised. In the entire market in the country, the sales counters need to have the product that the customer can buy and take delivery. Any glitch in the product not being available at the right time can result in a drop in customer interest and demand which can be disastrous. Transportation network design and management assume importance to support sales and marketing strategy. (No.1 Institute For Logistics and Supply Chain Management In Kochi Kerala)
Inventory control and inventory visibility are two very critical elements in any operation for these are the cost drivers and directly impact the bottom lines on the balance sheet.
Inventory means to value and is an asset to the company. Every business has a standard for inventory turnaround that is optimum for the business. Inventory turnaround refers to the number of times the inventory sold and replaced over a period of twelve months. The health of the inventory turn relates to the health of the business.