Raw Material to Product -Role of the Magic Wand of Supply Chain Management
Dr Ajay Sanker
Every time you go to a supermarket and pick up a few items off the shelf from grocery products to electronics or even clothes, the chances are that you will find them having been manufactured in Vietnam, China or in one of the South American countries. The red apples you buy to use for your everyday use comes by spending almost 30 days at high seas, have you wondered how can these apples still be fresh, crunchy and juicy? The computers or laptops you use have been shipped from factories either out of South Korea or Taiwan, even some of the house furnishings come disassembled from Malaysia, only to be re-assembled either at your home by yourself or by a vendor who sold you the product. There are also some Indian companies that import raw materials from various foreign destinations to create their product for end consumers. So how does all this work so seamlessly so the end consumer gets his or her product at the right time and at the right price?
Before we go any further or explain how all this works, one must understand what makes them work. This is like the backbone of every company that is involved in manufacturing, distribution or retailing, so what is this magic wand that makes this happen? The magic wand is called Supply Chain Management.
What is Supply Chain Management, how does it work? How does it help companies?
Supply chain management in simple terms mean the flow of goods or services, which includes transforming raw materials into final products and making them available to the consumer at the right time, with the right quality and the right price which the consumer can afford to buy, plus these final products need to be made available to the consumer at the right place where the consumer is located. Today the entire business concept has redefined itself from the traditional model. The end consumer today is well-informed about each product he wants to buy plus the assortment of products from various manufacturers has also given a better edge to the consumer to choose what he/she wants that fits into his/her lifestyle and wallet. Demand for a product in the market today is mostly driven by the consumer rather than the manufacturer or retailer, hence manufacturers and retailers are in a race to make sure they satisfy this demand of the consumer and that is where supply chain comes in to play. Right from sourcing or procuring the right raw material, making it available for production at the right time and getting the end product into the market requires a lot of planning and designing your supply chain network to work efficiently and effectively. Local or global companies when they introduce a product in the market and advertise, the entire market in the country and all the sales counters need to have a product where the customer can buy, any glitch in the product not being available at the right time can result in the drop in customer interest and demand which can be disastrous. Transportation network design and management assume importance to support sales and marketing strategy.
Inventory control and inventory visibility are two very critical elements in supply chain for these are the cost drivers and directly impact the bottom lines on the balance sheet. Every business has a standard for inventory turnaround that is optimum for the business. The health of the inventory turn relates to the health of the business. In a global scenario, finished goods inventory is held at many locations (warehouses) and distribution centres, managed by third parties. Any loss of inventory anywhere in the supply chain would result in loss of value, effective control of inventory and visibility of inventory gains importance as a key factor of Supply Chain Management.
Supply chain management is a
complex process and involves a lot of planning and forecasting right
from inception or sourcing which is the first stage. The
complexity begins when more and more players from transportation vendors, raw
material suppliers, third party providers handing warehouse operations,
distributors and retailers make the supply chain look Brobdingnagian.
With the advent of technological advancement, most of the supply
chain functions are getting simplified. Technology has not only reduced supply
chain timelines by increasing its reliance on system and application
capabilities to manage critical processes. Blockchain technology,
artificial intelligence, machine learning, and big data are some of the
examples of technological advancements that are applied in supply
chain operations making supply chain work seamless reducing the unsolicited
disruptions caused by lack of right information sharing throughout the chain of
supply. Blockchain technology gives utmost transparency and unprecedented
privacy in terms of all the transactions that take place in a supply chain
process. Blockchain is ideal for tracking assets making it helpful in
transport management, meaning capture and review shipment location, costs,
security, and conditions. With Machine learning, Big Data, companies can now
predict what the customer wants, his/her buying pattern, this helps them offer
tailor-made packages to suit each of these customers, which in turn helps
companies improvise on their supply chain network, improving
efficiency and being a responsive supply chain.