Supply Chain Management

SPMAs Martin Christopher said “The focus of supply chain management is on cooperation and trust and the recognition that properly managed, the whole can be greater than the sum of its parts”. A firm in the supply chain must initiate the attempt to form partnerships and actively manage the chain. To do this effectively, it must show the partners where the improvements will arise and how these will lead to a gain for everyone in the chain. To establish trust among the members of the supply chain, the lead firm must also suggest how communication can be opened up and how every member will be ensured that it is receiving its fair share of profits.

One perfect example of this has been Toyota. For years it has gathered extensive data on customer buying patterns. Then Toyota has used this information internally to manage its own layout and inventory. Now it has shared all of this data with its most trusted suppliers. This approach has allowed its supplier who knows how to take advantage of this data an opportunity to improve its service to Toyota while decreasing its own costs.

Managing a supply chain is more complex and difficult than managing an individual firm. But, the principles of management used to integrate a firm’s own internal functions also apply to managing the entire supply chain. For example, a well-understood phenomenon in the management of a firm is that there is always a bottleneck that constrains sales. This bottleneck may be internal to the firm (a process that cannot produce enough to meet demand) or it may be external to the firm (market demand that is less than the capacity of the firm). This principle applies to the entire supply chain.

While the supply chain is driven by customer demand, it is constrained by its own internal resources. One difference is that these resources may not be owned by the same firm. It is possible for the output of an entire supply chain to be limited because one firm does not have capacity to meet surging demand. It is also possible for every firm in the supply chain to be operating at a low utilization because there is not enough demand in the market for the products from the supply chain. There are bottlenecks inside the supply chain just as there are bottlenecks inside firms.

Firms are using Asprova’s advanced planning and scheduling functions to aid their collaborative communication. Our software develops a set of methods by which supply chain partners could have joint sales forecast and/or production plans in which a revision by one partner would be immediately transmitted to the next partner. Therefore its members are aware of the location of their bottlenecks internally and also in the chain which allows for proper management of the supply chain.

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