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What is Supply Chain Management?
Discuss Principles and Process of Supply Chain Management.
Explain 7 Principles of SCM.
Supply Chain Management is a process of managing and aligning the wide range of practices including the movement of raw materials, work in progress inventory and of finished products till the point of consumption (What is supply chain management, 2020). It explains the mechanism of planning, controlling and executing production to distribution flow in best economic terms. Supply chain explains the networks or channels of large number of suppliers.
Kellogg Company is one of the leading food manufacturing brand which produces well known diversified products such as cereal, toaster pastries, frozen breakfast, special K and much more. Its products are manufactured in 19 countries and marketed in more than 180 countries across globe. This report encloses information about SCM concepts and principles along with their impact over different components of supply chain in context of Kellogg organization. Report contain detail significance of SCM in respect suppliers to customers. Further, it evaluate the supply chain strategy of following organization and provides recommendations. Also, explains the interrelation of SCM with other organizational functions. Take online assignment help in the UK from expert writers at the best price.
Concepts, Principles and Process of Supply Chain Management.
Supply chain management is actively used in organization to increase value of customers and maintain the competitive advantage of firm. It exhibits course of actions that handle whole production stream of goods/services that begins from conversion of raw elements to distribution of final product to market (Chin, Tat and Sulaiman, 2015).
Concepts and Principles of SCM
SCM is a wide area of management which contains various terms and concepts. Each concept has its own significance in field of supply chain. Some them are explained below:
- Logistic Management: It is an important component of SCM which explains the process of fulfilling market demand on right time at right place by effectual movement and storage of goods and services with proper planning and implementation. This management helps firms to minimize cost and meet customer requirements.
- Value Chain: It refers to set of activities which are required to produce a product or service. As a part of SCM it justify the stages through which good is being processed and to final distribution phase. It includes various factors in between from procuring raw materials to till marketing activities.
- Distribution channel: This component is a spine of every Supply chain management because it involves different modes and medium through which final product or services can served to target market. This element act as a support system which ensure effective flow of goods from producer to final user (Dubey and et. al., 2017).
7 Principles of SCM
- Adapt Supply chain to Customer's needs: this principle states that supply chain manager required to understand the different consumer needs as target market is divided in number of target segments. There has to be proper supply chain in company to serve these segments profitability.
- Customize logistics network: organization required to preserve a effective logistic network to meet requirements of distinct segments on right time. SCM manager needs to strategize accurate distribution plan to meet urgent deliveries.
- Align demand planning across supply chain: this principle states that SCM manager must consider the market signals, ensures optimal allocation of resources and maintain shared informational data with trading partners.
- Differentiate Products Close to customers: SCM manager needs to understand the difference between Standardization and differentiation in order to reduce its cost of production.
- Outsources Strategically: this principle states that SCM manger required to strategize its sources appropriately to minimize total cost of materials and services.
- Develop IT: Organization required to build effective IT projects to support multi-level decision making which provides a transparent flow of information and products.
- Adapt both services and financial matrices: SCM manager must establish channel performance measures to sustain success in meeting end-user demand efficiently (Copacino, 2019).
PROCESS OF SCM
- PLANNING: The first stage of SCM approach is to forecast or develop a blueprint of course of actions in order to satisfy the demands and essential requirements of customers. This identify the answers about how products can be delivered to end user effectively. In context with KELLOGG, organization enjoys diverse market of different countries where it manufacture and sell its products. Kellogg's SCM manager needs forecast strategy to make available finished goods on time to its target customers. At this stage, the implementation of adapting customer's needs principle helps the supply chain team to consider the most favourable requirements of user such as features, quantity, quality of products (Christopher, 2016).
- RESOURCING: this phase reflects the importance of relationships with distributors or suppliers. After planning, manager develop different sources of distribution through which manufacture can able to move their end products or services to target markets. Suppliers act as mediator between producer and customers. KELLOGG supply chain manager mainly concern for creating and maintaining strong network of suppliers in order to serve its all type of products smoothly with efficacy. By proper implementation the principle of align demand planning across supply chain can build satisfied supply force for organization that helps in increasing efficiency and effectiveness.
- PRODUCT DESIGN & DEVELOPMENT: this stage of SCM process describes the manufacturing or designing of products according to needs or demands of customers. This stage covers the area of production, packaging, testing and sync all components together for delivery. In case of Kelloggs SCM manager construct schedule of activities which are need to be performed from production phase to preparation phase foe delivery. Manager keep proper eye on quality level, production outputs, workers productivity during this stage. With help of differentiate product close to customers principle company can easily go with standardization strategy because it provides same featured products in different company which decrease the cost of production as well as transportation in result it improve the efficiency level (Hugos, 2018).
- LOGISTICS: after developing product, the next step refers to delivery stage where product is being delivered to its end-user by accepting their orders. At this stage, KELLOGGS manager builds a strong network of warehouses and well equipped transportation system to ensure that products remain in best quality without any damage. The principle of customized logistics network can help in establishing effective channel so the requirements of different segments can meet on time this will upgrade the productive level of organization.
- DISTRIBUTION: last stage, states distribution of finished products through an organized transportation and storage system to different stores, malls, retailers and ultimate customer of target market. In terms of Kelloggs, manager has well established storage place and effective transportation system leads to proper fulfilment of customers demands without any delay. The principle of outsource and develop IT projects will help in effective decision making and reduction in cost expenditure of organization (Jabbour and de Sousa Jabbour, 2016).
Importance of SCM.
Supply chain management is important for each person who is connected with supply chain process. An effective management of supply chain network is essential and beneficial for organization's suppliers, distributors, retailers and its end users.Take Examples of Assignments Now!
IMPORTANCE FOR CUSTOMERS
- QUALITY PRODUCTS: final user will get high quality of products and services at right time and at right place. It will increase the brand loyalty and creates a positive impression for customers.
- FLEXIBLE SHIPPING: With emergence of e-commerce, buyers get more options to order any product it become easy for them to shop from anywhere. Digital planning of supply chain helps customers to receive their products from anywhere within few days with quick shipment.
IMPORTANCE FOR SUPPLIER
- INVENTORY: Supply chain management helps suppliers to maintain proper stock of inventory in order to avoid the shortage or surplus of stock. This is beneficial for suppliers as they can easily meet the bulky orders effectively placed by distributors.
- PROFIT MARGINS: Efficient supply chain system can enhance profit margin of suppliers. If supplier manages and align supply network with its distributors and complete order on time then supplier can charge more (Kshetri, 2018).
IMPORTANCE FOR DISTRIBUTORS
- NO MORE DELAY: one of the main advantage of SCM to distributor is that they can smoothly lower or eliminate any delay in decision making and processes of transporting products from one place to another. Since they are aware about what things are going on this will reduce the chances of late shipments and logistical errors.
- FAST MOVEMENT: An effective supply chain system helps in enhancing the distribution system through fast movement of good and services that facilitate distributor provide right quantity and quality of items to its retailers.
IMPORTANCE FOR RETAILERS
- MANAGES CUSTOMER DEMANDS: An appropriate implementation and collaboration of Supply chain network is beneficiary for retailers because it helps them manage and fulfil demands of diversified customers. Also maintain a healthy relationships with other supplying channels (Monczka and et. al., 2015).
- PROBLEM IDENTIFICATION: Retailers are the last part of supply chain so they have proper knowledge regarding procedure of supply so it become easy for them to recognize problem and help them to be prepared for uncertainty.
It is equally important for effective supply chain network that there must be a proper flow or movement of goods and services which begin from conversion of raw material till its distribution to maintain organizational productivity and profitability. Moreover, adequate flow of information regarding firm's suppliers or distributors and customers demand will help in efficient strategic decision making process. Lastly, correct circulation of financial funds will help SCM managers to develop powerful channel of distribution by establishing stores at new locations (Rajeev and et. al., 2017).
Interrelation between supply chain and other departments of company
Supply chain management is a continuous business phenomenon which concerned with the stages of business from procurement of raw material from suppliers to delivering finished goods to final consumers. Supply chain management has a connection with every department of business. All departments are interrelated in some way or other.
Finance and SCM: Finance department monitor and maintains cash flows in the company. It estimate revenue, make budget and manage accounts of the company. There is a strong interrelation between financial management and supply chain management. Supply chain manager can purchase raw material within the budget specified by finance department. Finance department manage bills payable and bill receivables by maintaining the accounts of all suppliers and wholesaler who sell and buy goods on credit respectively. Financial manager also accountable for managing inventory system especially for company like Kellogg who follows Just in Time management approach.
Marketing and SCM: Marketing department is responsible for creating awareness towards the product and than persuade customer to purchase product through effective advertising. Marketing department helps in converting sales by making persuasive advertising. It is accountable for making good relations with media, advertising agencies. It communicates with consumers either directly or indirectly. It is responsible for creating needs of a particular product. Marketing departments link with only distribution side of supply chain system. Marketing department forecast demand of the consumers, perform extensive research on consumer's needs and preferences. Results of demand forecasting and consumer research helps supply chain management in producing the right product, in right time, at right place and to the right people. Marketers helps in streamlining the functioning of supply chain system by creating of the people towards the company's product. It is not possible to sell goods if customer not aware of the product existence and features. It smoothed the inflow and outflow of raw material and finished goods respectively (Saenz and et. al., 2015).
Production and SCM: Production department is a main section of a manufacturing company. It assure streamlined manufacturing of goods. It is responsible for conversion of raw material into finished goods. Production department and supply chain management department relies on each other. Production function is placed between the functions of supply chain system. It placed between procurement of raw material and distribution of finished. Raw material purchased by procurement department are utilized by production department. Finished goods manufactured by production department are stored and delivered by logistic and shipping department respectively (Stadtler, 2015).
Sales and SCM: It is accountable for closing sale, retaining existing customers and acquisition of new customers. It is responsible for maintaining good terms with customers. Sales department plays a crucial role in functioning of supply chain system. The ultimate objective of supply chain system is get its products sold to customers. Sales experts helps in achieving this objective.
HR and SCM: Human Resource department is responsible for managing workforce of an organisation. It is accountable for selection of right employee for the company. It monitors and evaluates the performance of employees. Gives rewards to best performing employees. HR department plays an important role in supply chain system. Employees are vital component of this system. Recruitment and selection of qualified and skilled employees such as procurement manager, supply chain manager, master scheduler, logistics manager and materials manager for supply chain management is the duty of HR Manager (Tseng, Lim and Wong, 2015).
IT and SCM: IT department is responsible for making software for ease of operation of business, making, maintaining and updating website of companies. It ensure proper functioning of technological equipment. It Maintains management information system. IT department helps in streamlined operation of supply chain system. It make software for inventory management system and receivables management. IT department track the status of order. It provides technical support to supply chain management. It is responsible for giving updates regarding latest technology available in the market for distribution of goods to final consumer (Wang and et. al., 2016).
Evaluation and suggestion for current supply chain management
Kellogg is a company working in secondary sector that means Kellogg is a manufacturing firm. It import raw material from different countries of the world and export its final product to several countries across border. Correct supply chain management assures that business enterprises gets the right raw material at right right time, deliver right finished goods in right time at right place. There is a brief overview and evaluation of supply chain management of Kellogg. Worried for Supply Chain Management Assignment Help ? Get our experts Help Now!
Strategy: Kellogg had been adopted Just in Time approach of operation management in order to minimize wastage and cost of warehousing. Kellogg conducts a extensive consumer research in order to identify customer's taste and preferences and than manufactures the correct product according to the result of research undertaken. Retailers usually avoid keeping large quantity of inventory in their store because of fear of non-durable goods expiry before being sold out. That's why Kellogg follows just in time approach approach so that goods are manufactured not more than or less than the required quantity . Company concentrate more on cost-effective production system to assure that its product would have reasonable price (Wang and Cullinane, 2015).
Source of raw material: Kellogg had been established its manufacturing plant in 19 countries across the world. Company generally establishes its manufacturing plant near source of raw material however Kellogg procure its raw material from various countries around the world. The major ingredients that Kellogg requires for manufacturing are corn, wheat, rice, potatoes, cocoa, palm oil, berries, raisins and vanilla.
Delivery and Logistics: Company exports its products to almost 160 countries across the globe. Kellogg maintains good bonding with service sectors especially popular supermarkets like Tesco and ASDA and a wholesaler named Makro. Kellogg assign the logistics activity of its business to specialist storage and shipping companies so that company can focus on its core operation of manufacturing good quality products. Firm has tied up with a logistic service provider company named TDG. In order to reduce distribution cost company shares its transportation medium with another manufacturing company named Kimberly Clark. Sharing of transportation system helps company not only in reducing the price of product but also lessen the chances of truck being empty or partially loaded with final goods. Recently TDG employs a computerised inventory maintaining system which automatically notifies firm when shelves are empty and it is the time to deliver more stock (Wang and et. al., 2015).
Return System: As Kellogg is a manufacture of non-durable goods like cereals and cornflakes consumer can return the product after opening however if package was not opened by customer than there is provision period of 90 days during which customer can return commodity. Company collects data related to order and payment method, send an agent to customer's home, agent receive product and firm credit the amount in customer's account.
Evaluation: After discussing all the stages of supply chain management of Kellogg it has been concluded that the system is highly effective and efficient. Company has taken all efforts to make the system cost-effective and fast. Firm uses clever method to save money like sharing shipping system with Kimberly Clark. Organisation is highly concerned with the cost and speed of supply chain system. Company want to focus more on its core function of manufacturing food products that's why it relies more on specialist logistics and transportation companies. It has been clearly seen that company had adopted just in time and lean management approach of operation management in order to reduce cost and space required for inventory which ultimately leads be to low price, highly optimal supplement of finished goods to retailer and better quality.
Improvement Areas: Company can locate mobile storage warehouses near the production unit. This will reduce time and cost in delivering raw material to manufacturing plant. Firm can use data science to analyse data of customers for efficient demand forecasting. Organisation can utilize automation and artificial intelligence to increase speed and accuracy of supply chain. Company use should enterprise resource planning software to monitor incoming and outgoing inventory.
From the above report it can be concluded that concepts and principles of supply chain management can be applied for increasing efficiency and effectiveness of business operations. The report also conclude that effective supply chain management delights customers, build trust and good terms with suppliers, distributors and retailers. Further the report reason out supply chain management is interrelated with all the other areas of management. Finance department set budget for procurement, HR department recruit supply chain workforce, IT department provides technical support, marketing department creates awareness among consumers towards specific product. Hence proper coordination among all areas is essential for growth of a firm. Finally report evaluate that supply chain management of Kellogg is highly optimized. It is very cost-effective and execute in fast pace.
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