The supply chain constitutes the processes, which goods or services go through to reach the end user, including the design, manufacture, and delivery stages (Buxmann et al. 2004). Therefore, it encompasses suppliers, manufacturers, transporters, warehouses, wholesalers, retailers, and customers. According to Datta et al. (2008), all businesses and companies are part of one or more supply chains and depend on them to thrive. Nowadays, most companies want to understand the supply chain concept and the specific roles they should play in it (Ertek & Eryılmaz 2008). Their main objective is to participate in profitable chains to gain a competitive advantage over their competitors.
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The activities involved at this point include the creation of the master production schedules, which cater for quality control, workload, plant capacities, and equipment maintenance (Datta et al. 2008).
According to Du et al. (2012), the inventory is concerned with all the stock related issues along the supply chain. This component evaluates the amount of stock that should be held in form of raw materials, semi-finished products, and finished goods, in the supply chain. The main goal of the inventory is to ensure uncertainties along the supply chain are well taken care of (Datta et al. 2008). Inventory is expensive and a balance must be reached to ensure one does not pay too much in warehouse costs. According to Du et al. (2012), the location is concerned with where the facilities of production or storage are situated. The aim of this component is to ensure the most cost-effective places are selected for the location of the company’s facilities (Datta et al. 2008). It is also important to determine the need or room for improvement, expansion, or construction of new facilities to cater for an unexpected rise in demand. Once the locations have been determined, it is possible to determine the most cost-effective routes for the products to flow through in the supply chain, from the company to the end customer.
The transportation component is concerned with how inventory and goods move from one location to another within the supply chain (Du et al. 2012). The choice on the mode of transport depends on the nature of goods, urgency, distance of travel, and cost, among others. For example, air freight is fast, but is expensive and limited to light goods (Du et al. 2012). It is, therefore, used in the transportation of expensive and urgent goods. On the contrary, bulky goods are transported by train or ship. Transport by ship or rail usually involves more time and is used for merchandise that is not urgent. The information component is concerned with the amount of data that is available, collected, or shared across the supply chain. The flow of information along the supply chain should be timely and accurate to facilitate the decision making process involving the relevant stakeholders. Reliable and timely information allows the various players in the supply chain to make effective decisions on the amount of inventory to release for supply or raw materials to buy, where to locate the business, and how to transport finished goods (Ertek & Eryilmaz 2008).
All these decisions reflect the effectiveness and capability of the supply chain. The competitive advantage of a company is greatly reliant on the effectiveness of the supply chain. This explains why companies are constantly researching and working on how best they can improve their supply chains.
Significance of Supply Chain Management
Supply chain management (SCM) is an important aspect of any organization, as it improves the efficiency of its operations, which leads to customer satisfaction and...