Supply Chain Management is the conscious and active control of the activities of supply chain in order to gain a competitive advantage as well as capitalize on customer satisfaction (Jespersen & Larsen 2005, p. 40). It is a strategic concept that maximizes on coordinated decisions about where and how to store inventory, where to buy the material and the mode of distributions (Advameg 2010, par. 1-3 ).
The move aims at making the business operate in a cost effective and satisfy the customers on time. The concept also aims at representing the collective effort of all the businesses that produce the products and services to the consumer (The Aspen institute 2008, par. 1-3).
The supply chain businesses consciously work towards developing and sustaining the chains in efficient and cost effective ways. Supply chain activities involve product development, production, the sourcing of materials and managing logistics. Physical flows that connect the supply chains include the movement, transformation of the goods and materials and their storage (Caspari & Caspari 2004, p. 262).
Hand in hand with this are the information flows that enable the businesses to control every day’s flow of materials and goods, and coordinate long-term plans. There is also a constant flow of money among the suppliers, manufacturers then wholesalers, and to retailers as well as to end users
Dean says supply chain management is becoming a major concern to both medium and large companies (1). This is due to the need of satisfying customers and offer best quality in market. With the connection, the supply chain management becomes a supply network or web for the businesses because of the existing interaction among the companies (Li et al. 2004, pp. 107-113).
More so is the improvement of relation between distributors and suppliers. Instead of operating as adversaries, they operate in cohesion in order to perform effectively (Dean 2002, pp. 1-4).
A research conducted by management consulting company of A.T Kearney indicates that supply chain management reduces the costs of operation and production. The study established that the profits generated in chain supply can multiply into billions if slight improvements on operation of the supply are made (Mentzer 2001, pp. 61-70 ).
When divided among the connected companies, the research shows that the chains save more than 80% of expenses incurred in a typical manufacturing company. More so, the research shows that leading companies in supply chain gain up to 3-7% of total revenues compared to the medium businesses in the same industries (Dean 2002, pp. 1-4).
According to John Gossman, competition must not be between companies but among chains. Dean says that success does not spring from one transaction, rather the competition between the companies determines the profits that the business gains. The broadened management focuses on controlling production and logistics (Federal Reserve Bank of Dallas 2005, par. 3-5).
For a company to be a leading supply chain, Mckinsey and Company says that it must strive towards aligning their supply chain concepts with the strategy of the corporate. A case study on the supply chain management of Wal- Mart, a leading world’s retail operator, indicates that all the colleagues, from the casual employees to managers in the supply chain understand the strategies and aspirations of the supply chain.
The study also shows that the company actively controls the complexity of the product and service. The company has created multiple supply chains in order to gain a competitive advantage within the network (McKinsey n.d., pp. 7- 10)
The company has a top- down vision that checks on their main supply network. They ensure that there exists a balance between productivity, flexibility and initiatives to deliver the most demanded services without additional risks and costs.
The company also utilizes excellent strategies such as using the most robust techniques and other technological advancements to ensure execution of supply chain plans. Wal- Mart focuses on reducing costs by minimizing labor among all its distribution outlets.
The company’s strategy is to maximize on a sizeable and scaled that compels suppliers to streamline operations as much as possible through unit packaging (McKinsey n.d., pp. 7- 10). Amazon is the other leading company that capitalizes on having every warehouse is flexible in order to accommodate products of different shapes and sizes hence meeting diverse customers need. This strategy also works towards elimination of additional costs. The company also utilizes on new skills and talents to the fullest (Kale 2004, pp. 503- 504).
Reference List
Advameg 2010, Reference for business. Web.
Caspari, P. & Caspari, J. 2004, Management dynamics, John Wiley and sons, New York.
Dean, E. 2002, The perceived impact of supply chain management on organizational effectiveness. Web.
Federal Reserve Bank of Dallas 2005, Supply chain management: the science of better, faster, cheaper. Web.
Jespersen, B. & Larsen, T. 2005, Supply chain management-in theory and practice, 1st edn, Copenhagen business school press DK, Copenhagen.
Kale, S. 2004, Global competitiveness: Role of supply chain management. Web.
Li, S., Nathan, B., Nathan, Ragu T. & Rao S. 2004, ‘The impact of supply chain management practices on competitive advantage and organizational performance,’ Omega vol. 34, no. 2, pp. 107-124.
McKinsey & Company, The race for supply chain advantage: six practices that drive supply chain performance. Web.
Mentzer, J. 2001, Supply chain management, 2nd edn, SAGE, California.
The Aspen institute 2008, Supply chain management. Web.