How supply chain management affects the manufacturing industry
The concept of supply chain management is relatively simple. It involves the approach to managing the distribution of goods from the producers of raw materials, thru to manufacturers and eventually to end users in a systematic way. If you fail to do this and there are delays or breakdown in the chain your business will be faced with problems.
So the aim must be to ensure that any raw materials are ordered promptly and delivered to the manufacturer on time. The finished manufactured products are then distributed to the end user. This leads to happy customers, goodwill, and increased profits for the manufacturer right back to the supplier of the raw materials.
This looks very simple on paper, yet in the real world of manufacturing it can be anything but. That is why you need to ensure your supply chain is systematically managed.
If it has not already happened to your company, imagine what a breakdown in the supply chain could do. Production can stop, with the added problem that your employees will still have to be paid despite producing nothing. You may then have to try and secure alternative supplies that might well increase costs, further hitting your profit margins. If the order for manufactured goods is time-sensitive, failure to deliver on time can lead to loss of customer confidence and future orders drying up. This could have a severe impact on your enterprise.
Just how crucial supply chain management is to the manufacturing industry is fully appreciated by entrepreneurs such as David Kiger. Kiger’s expertise covers logistics and supply chain management. He is CEO of Worldwide Express that makes $500 million net per annum. The company serves the needs of small businesses which means Kiger has to be fully cognizant of the supply chain requirements of his clients.
Supply chain management strategies will differ according to the size of a company. Large companies often require their own inter-departmental internal chain management systems. If your business deals purely with a city and the surrounding areas, its requirements will be different from those whose market is based within the state or nation and most certainly from one involved in the export market. It can be argued that the only differences are the complexities, but whatever your market you will need to be able to ensure that any raw materials are ordered and delivered on time and that the finished articles are with the customer (end user) by the agreed date.
The strategy for your company will depend on its size and requirements. Take transportation for example. Do you need your own trucks to deliver manufactured goods to the wholesaler/ end user or can you manage by contracting out deliveries. This is only a small part of what constitutes chain management, but a crucial one all the same.
There are sophisticated software systems for ensuring effective supply chain management. Not only do they assist in reducing inventory – which can be very time consuming. Crucially they will assist in coordinating and integrating flows both within and among companies, which effectively is what supply chain management is really about.