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Vital Elements of Supply Chain Management in Food Business Vijay Sardana In Common mistakes generally happen in supply chain management have already been dealt in the previous two articles. This discusses the issues on developing cost efficient and efficient supply chain in agriculture and food business. This author is currently conducting a detailed survey of all the retail supply chain initiatives initiated in India. Many of the points raised in this series of articles are based on live experiences in the field in India and abroad. Kindly feel free to mail your queries and questions. Supply Chain in Perishable Food Business A supply chain is a network of facilities and distribution options that performs the functions of procurement of perishable raw materials and materials, transformation of these materials into intermediate and finished products at factories, and the distribution of these finished products to customers through outlets or direct marketing. Supply chains are required and exist in both support services and as well as manufacturing organizations, although the complexity of the chain may vary greatly from crop to crop, location to location, season to season, industry to industry and firm to firm. Supply Chain for Perishables is a Complex equation to balance In a very simple supply chain for a single non-perishable food product, raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centres, and ultimately, customers. It appears to be an easy business operation, which can be managed with little knowledge and resources. In actual world, realistic supply chains have multiple end products with shared components, facilities and capacities and many regulatory provisions related to food safety, public and environmental health. The flow of materials is not always along an anticipated and planned network. Various modes of transportation may be considered, and the bill of materials for the end items may be both large and complex. Importance of Managing Supply Chain
Tactical Level decision-making On the other hand. marketing. tactical or operational decisions are short term. They should also have burning desire to create something meaningful outcome with broad vision keeping all stakeholders in mind. Very often many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities.Traditionally. This level of planning needs people with insight of the subject. With globalisation process. For sports loving managers and citizens. and focus on activities over a day-to-day basis. On the other hand purchasing contracts are often negotiated with very little information beyond historical buying patterns. the entire material flow is owned by a single firm and on the other side where each channel member operates independently. supply chain management is like a well-balanced and well-practiced relay team. Elements of Supply Chain Decision Making in Perishables¶ business The decision making process for an effective supply chain management for perishables can be categories under two levels: y y Strategic level Tactical or operational level Strategic Level decision-making: Strategic decisions are made typically over a longer time horizon. which is in conflict with manufacturing and distribution goals. planning. not the ownership. The entire team. distribution. The result of these factors is that generally there is not a single. commercial and policy dimensions in decision making process. between the various players in the chain is a key in its effective management. this has become more complicated because at strategic level it is important to have global perspective as well. technical. and the purchasing organizations along the supply chain are operated independently. These are closely linked to the corporate strategy and guide the supply chain policies from a design perspective in line with corporate objective. manufacturing. These managers are generally institution builders and willing to share and communicate their vision with others. there is a need for a mechanism through which these different functions can be integrated together. Therefore coordination. Clearly. The relationships and understanding are the strongest between the players who directly pass the baton. Such a team is more competitive when each player knows how to be positioned for the hand-off. therefore. needs to make a coordinated effort to win the race. Marketing department¶s objective is thus to offer high customer service and expect maximum sales realization. integrated plan for the organization. Characteristic of Effective Supply Chain in Business of Perishable An effective supply chain management can be typically viewed to lie between fully vertically integrated firms where. Supply chain management is a strategy through which such integration can be achieved. The effort in these types of decisions is to effectively and efficiently manage the product flow in the ³strategically´ . These organizations have their own objectives and these are often conflicting. multidimensional understanding and analytical ability to integrate various legal.
We will discuss these points in detail in future articles. Other considerations vital for supply chain is balancing the demand and supply without compromising on food safety and quality control measures at a production area and through out supply chain. production limitations. tariffs. The location of facilities involves a commitment of resources to a long-term plan. locations to produce them at. and level of service. Important Decision Areas in Supply Chain for Perishables There are four major decision areas in supply chain management of business of perishables. allocation of suppliers to location. 1) Geographical Location 2) Production area 3) Storage or Inventory 4) Transportation and distribution Geographical Location Decisions for Food Producti on One of the most crucial decisions in food business is. Underlining factor of these factors in identifying the geographical location for investment in procurement. These decisions should. production facilities and storage points are the part of first step in creating a supply chain. These decisions include the construction of the master production schedules. cost. therefore. Two important aspects like storage or inventory management and logistics will be dealt in detail in our subsequent articles. There are both strategic and operational elements in each of these decision areas. The recent initiatives taken by many companies in India indicate that when these factors were ignored they became one of the reasons for cost overrun and quality issues in supply chain management. and communication and extension strategy. understanding the factors affecting procurement of food is necessary. duties and duty drawback. These important decisions will impact on the revenues. Operational decisions should also focus on detailed production scheduling. costs and customer service levels of the company.planned supply chain. Production Decisions for Perishable Foods One of the most crucial decisions in developing an efficient supply chain of perishables is to balance supply and demand of perishables. The strategic decisions should be to select the products to produce. and location of these are determined. local content. be determined by an optimisation process that considers production costs. These decisions represent the basic strategy for accessing customer markets. It is true that these location decisions are primarily based on strategic reasons but we should not forget that they also have implications on an operational efficacy and its performance level. production locations to distribution centres and distribution centres to customer markets. Once the size. number. possible paths by which the product flows through to the final customer can easily be made. . scheduling production on farms. distribution costs. and will have a considerable impact on revenue. etc. to select the right location for investment? In food business. The geographic placement of sourcing points. processing. taxes. distribution and marketing infrastructure is equally important.
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