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Elements That Motivate the Need for Effective Supply Chain Management

One of the most challenging aspects of the contemporary business world is Supply chain management. Businesses across the whole world are working hard to meet up with the changing demands of consumers. The key drivers of fueling the desire to offer a more sophisticated Supply chain include Globalization, Cost-awareness, Technology, Transportation, Suppliers, Customers, and Sustainability.

Globalization

The external forces (such as political, technological, economic, socio-cultural, environmental and legal), local competition, continuous policy and regulations changes, pressure from international brands and the rest, all affect the market demand of the consumers. As a result of this, companies are facing huge challenges to meet the requirements globally.

Through the product barriers are eliminated, no products are now considering domestic products but due to globalization forces companies tend to change policy and strategy regularly. Besides, with the benefits of globalization now, foreign investors are encouraged to invest in several countries which force local companies to improve quality of existing products which create huge challenges in procurement, manufacturing, transportation and distribution activities for the companies.

Cost-Awareness

There are four major decision areas in cost awareness:

  • Location : Convenient and feasible location with the necessary resources is the primary step towards creating a strategic network. However, due to geographical distance and cost, companies often aren’t able to cope with customer expectation.
  • Production: Cost fluctuations from production levels are critical issues for strategic decision, such as what product to produce, which plant to allocate and what supplies to get for production.
  • Inventory: Inventory cost varies at different level starting from raw materials to finished goods. Maintaining the inventory can be expensive especially during the period of price inflation.
  • Transportation: The cost associated with transportation is also an issue that gives companies headaches. The channel of distribution could be by air, ship, and road. Air shipment is fast and reliable but expensive, while sea shipment is cheap but time-consuming. If there is suitable transportation network, delivery of the product to the market will not be at risk.
  • Technology

    With the benefit of technology, customers are now becoming more technological oriented, focusing on online trading, online shopping, online payment, online information, online virtual chatting, and so on. This technological process has a greater impact on customers and today, customers are increasingly willing to get more information about their choice. Hence, for a company to be successful today, it needs to become more technologically connected to its consumers.

    Suppliers

    Supplier's motivation is important for quality, cost and delivery expectations of producing a product with value as they have a greater influence on supplying item. Hence, ensure that you have a healthy relationship with your suppliers.

    Customers

    Customers are the most unpredictable variables when determining demands. Frequent changes of demand, a new expectation, changing approach of an existing product, influential behavior attitude towards products are all determined to develop a customer-product innovation strategy.

    Sustainability

    Creating sustainable chain is a major concern for companies. There is a constant pressure from the different variables such as regulations, geographic in nature, social-economic impact, and international policies.