LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

Supply Chain Management - An Overview

World Wide Shipping
By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com

If you are not in a company being impacted right now by Supply Chain Management or by Continuous Replenishment and do not think that Supply Chain Management affects you, then you are wrong. If it does impact you now, it will. The concept is appearing in various industries and is moving to moving into smaller companies. Start to understand what it is, and what it means to you. Supply Chain Management is a dynamic paradigm driving through companies. Articles on supply chain management appear in many different publications, national and international, with different target audience. While many of the stories relate to large companies who supply large retailers or grocers, the attention SCM is getting is phenomenal. Add in the global impact of customers, competitors and suppliers; and the magnitude of the supply chain is very significant.

What It Is All About. Supply Chain Management is a reverse of prior practices where manufacturers supplied product to customers and they wanted to. Now customers tell suppliers how and when they want their inventory delivered. The driver behind Supply Chain Management is to remove inefficiencies, excess costs and excess inventories from the supply pipeline which extends from the customer back through his suppliers and through his suppliers' suppliers and so on back. By having the program driven by the customer, it is hoped that inventories, caused by uncertainties and slow response, will be significantly eliminated. While there are sales incentives to major suppliers with the carrot of category management or similar programs, the success of supply chain management rests with logistics.

The Five Key Issues of Logistics Effectiveness are core to Supply Chain Management--

Supply chain management requires a logistics model based on quick order to delivery response. A model which focuses from vendors' doors through to delivery to customers' doors. The model must meet the customers' demanding and specific requirements. It requires organizational flexibility and responsiveness, internal and external teamwork and demands the use of processes and technology. A common practice which causes inefficiencies, excess inventories and high costs is forward-buying. On the surface, it looked like a way to purchase at a low price. But in reality, this practice is inefficient and results in additional, higher costs and negative impact throughout the supply chain. Forward-buying strains the capabilities of suppliers to respond and for the distribution department of customers to handle the products. It creates an operational and cost inefficiency for both supplier and customer. By forcing excess sales through the supply chain, then the hidden costs of manufacturing and distribution valleys, after the huge peak caused by the forward-buy can be significant. Supply Chain Management is about what the customer demands. It is not about what the supplier is capable of doing at present.

The customer requirements may vary by customer, but they do have certain consistencies to logistics--

Effects of Supply Chain Management. The initial benefits of supply chain management accrue to the customer, the initiator of his supply chain. He earns the reduction in inventories by driving out excesses inventories which he must purchase, store and be responsible for. The impact of supply chain management to the supplier may be more difficult to classify, initially, as benefits. They may vary, but may include--

Conclusion. Supply chain management is here. It is not about shipping orders; it is not about making product then pushing it out the door. Supply chain management is about developing a process to respond to the different requirements of each customer. Customers are driving suppliers' practices. Being successful requires logistics effectiveness. Customers, competitors and vendors are global. This is an exciting challenge and opportunity for companies who see the potential and make it happen.