Supply Chain Management

Introduction:

            Supply chain management can be defined as the process of planning and implementing and at the same time controlling the supply chain in the most efficient possible way, the supply chain management involves controlling of finished goods from the origin to the consumption level. The traditional supply chain involved two or more companies which were in a series that enabled the link between the customers and the supplier. In this traditional method therefore the finished goods are supplied to the customer through a chain of distributors. 

Advantages of supply chain management:

            One of the advantages of supply chain management over the traditional chain management is that suppliers share valuable information throughout the chain and this information includes information on demand, forecasts on sales and demand and transportation, through sharing of information the firms in the chain will become more efficient and as a result this will reduce the cost of production rendering them to have competitive advantages over other firms.

            Supply chain management will improves productivity and efficiency in a firm as compared to traditional chain management, SCM (supply chain management) improves the firm’s processes whereby it improves on quality control and inventory control, this in turn improves on the productivity and efficiency of the firm. Increased efficiency can be seen in terms of the reduction in the cost of goods sold by the firm. This is achieved through reducing the cost of inputs whereby a firm will source the less costly raw materials.

                Supply chain management will also reduce the transport duties of a firm and taxes, the shipment and transportation duties are shared by firms and as a result these duties are reduced and this constitutes to the reduction in the cost of production and final price of goods. When there is sharing of transport duties there is a reduction in transport errors that occur between firms, this chain management ensures that the delivery of good s is streamlined and therefore the delivery time of goods is reduced, this will in turn increase consumer loyalty.

            The other advantage is that firms reduce the issues of bad debts in that the payment terms across the firms is well organized and defined, this ensures that a firm does not accumulate bad debts because the payment terms between firms is well defined and followed by the firms in the supply chain.

Disadvantages of supply chain management:

            Despite the advantages associated with the supply chain management there exist disadvantages which are associated with it as compared to the traditional chain management. One of this disadvantage include the issue of employment, the traditional supply chain management involved salesmen and other managers who were to ensure that the transaction is completed as required, today after the introduction of this new supply chain management there has been increased unemployment which has resulted to high unemployment levels in the economies, despite the new management system providing a faster and convenient way to improve both the firms objectives and the customer.

            The other disadvantage is that initializing the supply chain management is complex and requires a firm to invest more in terms of capital. therefore this method is costly and very complex as compared to the traditional method. It is also costly in that it requires the management of various activities within the firm.

How supply chain management modify economics:

            Supply chain management has changed some concepts of the economy, complementary firms that depend on each other are now being viewed as one organization in that they share information regarding forecasts, the market is now becoming more and more competitive and consumers now receive low priced products as the firms reduce the cost of goods sold, firms are also experiencing high levels of profits as they initiate the supply chain management.

 Conclusion:

            The supply chain management is more advantageous to a firm than the traditional supply chain management. Firms that have adopted the supply chain management strategy experience competitive advantages over their rivals who have not adopted this strategy. The firms gain advantage due to the increased efficiency in their transactions and this leads to increased profits.

            The supply chain management has advantage over the traditional chain management in that suppliers share valuable information throughout the chain, through sharing of information the firms in the chain will become more efficient and as a result this will reduce the cost of production rendering them to have competitive advantages over other firms.

            It will improve productivity and efficiency in a firm it improves the firm’s processes whereby it improves on quality control and inventory control, this in turn improves on the productivity and efficiency of the firm. It also reduces the transport duties of a firm which include the shipment and transportation duties which are shared by firms and as a result these duties are reduced and this constitutes to the reduction in the cost of production and final price of goods.

References:

Tage Larsen and Birgit Jespersen (2005) Supply Chain Management: Theory and Practice, Copenhagen Business School Press, Denmark