Supply Chain Management
When people go to the store to buy something, they don’t usually think beyond to where the item comes from, and how it got there. Usually, when something you normally buy is out of stock, most people will find something similar. As to why it is out of stock usually, don’t cross the person’s mind except for that the store that carries that product just sold out. People don’t think about supply chain management, and all the components involved. What is supply chain management? According to NC State University, supply chain management is the active management of supply chain activities to maximize customer value and achieve a competitive advantage. It is also for the company to develop and run supply chains in the most effective and efficient ways possible and it covers everything from development, sourcing, production, and logistics (“What Is Supply Chain Management (SCM)?”, 2017). This paper will define how supply chain management has evolved over the past 20 years and the primary components along with the importance of each component.
Supply Chain- How Has It Evolved?
According to chapter 1 (2016), a supply chain involved all parties, directly and indirectly, with fulfilling a customer’s request. When you think of the supply chain, it includes not just the manufacturers, but also the warehouses, retailers, transporters and the customers. It involves all the functions like new product development, marketing, operations, distributing and customer service. The following are the stages of a typical supply chain: Customers, retailers, wholesalers, manufactures, component (para). Supply chain management has improved over the years. Twenty years ago, the supply chain was considered to only involve the logistics in getting the product from the supplier to the market. According to an article from Strategic risk, it was reported that the US food industry wasted 30 billion dollars per year because the supply chain partners couldn’t work together. Many department stores were forced to give huge discounts just to get rid of items because the calculations were miscalculated, and the stores ended up with unsalable merchandise. Customers were upset because items were out stock, again due to miscalculations. The supply chain 20 years ago was dysfunctional (“How Supply Chain Management Has Evolved Since 1990”, 2014). Different components affect the supply chain. I work for a cable manufacturing company called Wavenet, and the primary components are Planning, Sourcing, and delivery. Last year, there was a tariff that was imposed on thousands of products coming from China, so we had to come up with a plan to find new sources. We have since found 2 different sources in Thailand to avoid the now 25% increase on tariffs. The price is higher to purchase from Thailand, but it is still cheaper than paying the tariff. The lead time from Thailand is longer than products coming from China, so that was another thing we had to factor in when forecasting. Last year when the news of the tariff came out, we planned by purchasing more containers by the end of the year. We purchased enough products to last use through April of this year. It is important to have a strategic plan before making any decisions. It was also important for us to find different sources so that we didn’t have to raise prices on our products and to make sure we received the products on time to fulfill our customer’s demand.
Supply Chain Decisions
6 years ago, Wavenet moved to a much larger building and spent money on putting in racks in the warehouse along with purchasing new equipment. These decisions were part of the supply chain design on structuring the supply chain for the business. We just renewed our lease for another 6 years, and we are in the process of looking to purchase our building in the future. Supply chain planning was also used when we wanted to maximize the supply chain surplus by ordering the additional 40 containers before the tariff increases last year. We started to plan with a forecast for the upcoming year of demand and tariff factors. Supply chain operations are done daily and weekly. We are always getting bids from our customer’s, and once the bids are won, we allocate the inventory that customer, set a date by which the order is filled, picked, shipped which by then a replenishment order has already been placed. Bids that are won are not calculated in the normal forecasting since they are spot purchases. Although we have sourced 2 different factories located in Thailand, we still need to find more sources for the rest of the products still coming from China. We do have an advantage over our competitors at this time because a couple of our main items always came from Korea and Vietnam and because of the long relationship we already have with them, they informed us that they will be loyal to Wavenet by giving us a priority. Wavenet had a deep financial impact on establishing the supply chain from the tariffs. The financial supply chain also provides the cash flow to pay the employees and keep the doors open. Managing cash and capital is as important as building a relationship with the supply chain partners. By way of definition, “the financial supply chain refers to the transactions that occur between trading partners that facilitate the purchase of, and payment for, goods and services, such as sending purchase orders and invoices and making payments (Blanchard, 2013). When we planned to purchase the extra 40 containers, we knew that we were going to be tight on funds when the payments were due. Fortunately, we had an increase in sales this year that helped us. We also got extensions from our factories where we were able to pay for the extra containers when we were able to bring them to our warehouse.
The organizational considerations for developing a supply chain management is planning, sourcing, and delivery. Wavenet knows the importance of the supply chain and has a strategic plan from the raw material, supplier, logistics and delivery. Our regional director is always traveling to new locations and meeting new potential sources to meet our needs. We added to our logistics team to better meet our customers shipping needs, and we have also changed trucking companies to better meet our delivery demands. We are in the middle of restructuring our customer service department to better service our customers to provide them with the best customer service. All these organizational considerations were done to improve the supply chain. We want to be able to improve our customer service and at the same time to reduce operating costs.