Key Drivers of Supply Chain Management

24th September 2022 0 By indiafreenotes

Transportation

  1. Faster transportation allows a supply chain to be more responsive but generally less efficient. Less than full truckloads allow a supply chain to be more responsive but generally less efficient.
  2. Transportation can be used to support a firm’s competitive strategy. Customers may demand and be willing to pay for a high level of responsiveness.
  3. Mode of transportation is the manner in which a product is moved (air, truck, rail, ship, pipeline, electronic). Each mode differs with respect to speed, size of shipments, cost, and flexibility.
  4. Routes are paths along which a product can be shipped.
  5. In house or outsource the transportation function. Many companies use third-party logistics providers (3PL) to perform some or all of their transportation activities.

Inventory

When it comes to inventory as a driver, optimizing responsiveness often dictates stocking higher product levels and at more warehouse locations.  Efficient inventory allows for unexpected fluctuations in demand that can be met promptly.  However, this approach incurs higher storage costs and must be weighed against the benefit of widespread availability.

Efficiency in inventory management calls for reducing inventory levels of all items, especially those that do not sell frequently.  Also, stocking inventory in only a few central distribution centers achieves economies of scale and cost savings.

Facilities

  1. Places within the supply chain where inventory is stored, assembled, or fabricated. Decisions on location, capacity, and flexibility of facilities have a significant impact on performance.
  2. Facilities Impact: Facilities either store inventory between supply chain stages (warehouses, distribution centers, retailers) or transform inventory into another state (fabrication or assembly plants).
  3. Centralization of facilities uses economies of scale to increase supply chain efficiency (fewer locations and less inventory) usually at the expense of responsiveness (distance from customer)
  4. Facility Decisions Location: Centralize to gain economies of scale or decentralize to be more responsive. Other issues include quality and cost of workers, cost of facility, infrastructure, taxes, quality of life, etc. Capacity. Excess capacity allows a company to be more responsive to changes in the level of demand, but at the expensive of efficiency.

Location

Prioritizing responsiveness for the location driver often involves maximizing convenience by establishing many locations near customer groups.  For example, fast-food chains use location to be very responsive to their customers by opening many stores in high-volume markets.  Many sites allow them to respond quickly to consumer demand but increase operating costs by operating many stores.

Efficiency is achieved by operating from a select few locations and centralizing activities.  An example of efficiency in location would be how e-commerce retailers serve global markets from only a few central locations, performing a wide range of activities.  While this allows each site to be more efficient, it also makes them susceptible to disruptions, as seen with the coronavirus outbreak.

Information

  1.  Data and analysis regarding inventory, transportation, facilities, and customers throughout the supply chain. It is potentially the biggest driver since it affects all the other drivers.
  2.  Information’s Role: Information connects various supply chain stages and allows them to coordinate activities. Information is crucial to the daily operations of each stage of the supply chain. An information system can enable a firm to get a high variety of customized products to customers rapidly .An information system can enable a firm to understand changing consumer needs more