The objectives of Supply Chain Management
The Term Supply Chain Management came into existence in 1980s with an objective of addressing the needs of consolidating key business processes, from the original suppliers to the end users. Here, original suppliers refer to those identities which provide products, services and information that add value for customers and other stakeholders. Thus Supply Chain Management requires that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations and production capabilities.
The idea is to optimize the entire supply chain network by providing all the relevant information to every relevant company in the supply chain instead of companies seeking to sub optimize based on a local interest. This helps in improving the entire supply chain scenario with better planned overall production and distribution. This not only leads to cost reduction but also quality final product, thus increasing sales to the benefit of all the units involved. Thus the concept of competition between two companies fades and rather it is the betterment of a supply chain.
Thus, the main aim of supply chain management is to enable best utilization of resources like including distribution capacity, inventory and labor to fulfil the needs of the customer. In order to meet its objective of matching demand with supply with the minimal inventory, the SCM includes liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost and transportation, implementing JIT (Just In Time) techniques to optimize manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer markets, and using location/allocation, vehicle routing analysis, dynamic programming and, of course, traditional logistics optimization to maximize the efficiency of the distribution side.
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