The Simple Guide to Supply Chain Management
Supply chain management (SCM) makes sure that products and services are moved around inside a business. Raw materials to finished goods are all part of this. In this process, you build a competitive infrastructure, improve logistics around the world, coordinate supply and demand, and look at how well your company is doing around the world.
Supply chain management includes things like demand, commodities, and resources. People who use supply chain visibility software constraint-based synchronization of company processes may be able to make more money. Management places a high priority on cost-cutting strategies in order to improve throughput (item flow). It all comes down to money.
The History of Supply Chain Management
Historically, transportation technology was primitive, and the cost of transferring commodities influenced production and distribution. So things were assembled near to raw material sources. Then, in a mostly linear route, these goods reached their final customer.
Some of the drink was drank locally, but most was sent to Europe and the Atlantic in bottles and barrels. Rum distilling was supposed to be the most important industry in colonial America, however its prominence is now mostly forgotten save in pirate stories.
Production networks changed dramatically during the late 18th century Industrial Revolution. This shift was centered on cotton. Prior to the Industrial Revolution, India was the world’s cotton manufacturing hub, exporting textiles to all corners of the globe. Cotton imports were a major source of resentment for the British wool industry.
Railways, trams, bicycles, and the Suez Canal were all invented in the next century. We had the Panama Canal, cars, and even early airplanes by WWI. As a result, shipping costs fell dramatically. Between 1840 and 1910, ocean freight rates fell 70%.
Unlike in the past, communications began to shape developments without regard to transport. Alexander Graham Bell patented the telephone in 1876, although phones were not widely used in the US until the 1920s. The first transatlantic call was made in 1926, and it would be another two decades before long-distance telephony became widespread.
Early 1970s ships could carry four times the load of conventional ships. They could make six round voyages per year between Europe and Asia, compared to three and a half for the earlier ships.
Some Western countries built old-style ports throughout the 1970s. They had big pre-container fleets and other infrastructure and couldn’t quickly containerize anything. Bureaucratic intransigence and port union political pressure also hampered the change.
A clean modularization and outsourcing of the production process followed. Ironically, one of the first firms to adopt this was Mattel, a toy maker located in the United States. Despite its All-American image, Barbie has been made in China since 1959. The first Barbie manufacturers were in Japan and Taiwan, and today a global network produces the dolls.
By the late 1980s, the entire globe was emulating Japan. Though East Asia assimilated the network-based production system well. There were several causes. First, most of the area’s infrastructure was new. In many situations, the infrastructure was built to assist Japanese corporations’ supply networks. Second, geography assisted because most major commercial centres were connected by water. This was important since shipping is cheaper than rail or road.
Around 1993, American Express executives found that operating credit card operations in India was much cheaper than elsewhere. India was chosen to anchor Asia-Pacific operations when the bank decided a year later to combine finance services in three sites globally. British Airways and GE Capital quickly had substantial outsourcing divisions in India. Global services outsourcing was born.
Containerization and fixed-line telephony improvements led to the lean manufacturing approach. Despite decentralized manufacturing, we still have a pyramid of strict industrial linkages (such as the Japanese keiretsu). With the advent of telecommunication, everyone could now contact anybody, define a need, and negotiate a price. This strategy had many of the same benefits of lean production, but was significantly more customizable. The supply chain had evolved into a cloud, a dynamic ecosystem where economic actors might collaborate and compete.
This new manufacturing network is evident in Apple’s iPhone and iPad manufacture. The iPhone is built in China by Foxconn using components supplied all around the world. During manufacture, the product never enters an Apple facility. The final assembler, Foxconn, gets only 2.5% of the price of an iPhone, while Apple gets 66%. Notably, Samsung is a significant supplier of iPhone components, while competing directly with Apple in the mobile phone and tablet sectors.
The Impact of Globalization on the Supply Chain
South African exports and imports of finished goods, components, and materials are becoming more common across a wide range of borders and trade routes. They also have to deal with more competition from businesses from other countries that are entering the local market. Both sides are motivated by margin pressures, a drop in domestic demand, and more competitors.
It’s important for businesses to be able to change their operations and supply chains quickly so that they can stay ahead of their competitors.
As more people have access to the internet and the world becomes more global, more supply chains are being formed. When businesses move into new markets and deal with suppliers and customers from other countries, things get more complicated for the supply chains of those businesses. Businesses and their supply chains around the world are affected by changes in customer expectations, regulatory and environmental rules, and a decrease in natural resources.
In countries that are still developing, businesses don’t build their own supply networks. Instead, they use those that already exist. This lets them start selling to other countries in a few months. To keep up with the growing speed of globalization, a lot of money needs to be spent on transportation infrastructure, like roads, trains, airports, and sea ports.
There aren’t many transportation options in this area, so businesses in the area are taking steps to lessen the negative effects. Strategic route planning can help you choose the best transportation modes, use fuel-efficient cars, use the right technology, and improve logistics operations in general.
Supply Chain Consulting
Supply chain management consultants work very closely with their customers to build a supply chain strategy and operational model that works for them. They also make it easier for people in the supply chain, like suppliers and buyers, to talk to each other.
Problem diagnosis and root cause analysis aren’t the only things that consultants do. They also design business structures and procedures, evaluate performance, and come up with key performance indicators (KPIs).