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Supply Chain Management and its Component

Supply chain management and its various components. In the current business scenario, supply chain requires great consideration as it can increase value of whole production process of an organization. Supply chain is basically the whole process starting from the raw material from the suppliers to manufacturing to packaging to warehouse to distribution to final reach of the product or service to its intended consumers. So there is lot of components in a supply chain of a large company. To analyze components of supply chain, Wal-Mart is taken that is global leader in retail industry and also the largest corporation in the world (Walmart 2011). Wal-Mart is continuously developing its business by developing its services and product portfolio. The supply chain of Wal-Mart is also effective to enhance its

effectiveness within the industry (Hoppenstedt & Rathkolb 2005). This paper will discuss about supply chain components and problems and approaches to solve the problem. Components of Supply chain Management Supply chain is a network that is used in business concern to sustain the exact flow of information in the organization (Jespersen & Larsen 2011). Following are the six key components of the Wal-Marts supply chain: Production

Production is an important element of the supply chain of Wal-Mart. Strategic decisions of Wal-Mart regarding production focuses on customer needs, demand from market, capacity, quality and volume of goods (Wal-Mart 2011). There are some problems that may occur in the production of Wal-Mart such as changes in tastes & preferences of customers, new technology, and low quality of raw material. To approach this problem for supply chain component, Wal-Mart should conduct surveys and get continuous feedback from customers in timely intervals as it would be effective to continue with the production as per their changing needs and requirements (Jespersen &

Larsen 2011). Supply:

Supply is an outsourcing process as through this an organization obtains required material and inputs for production of its products & services. It is one of the major components of the supply chain of Wal-Mart (Wisner, Tan & Leong 2008). Wal-Mart focuses on the quality of product, flexibility in prices, developing velocity to determine supply of inputs that helps to maintain its low cost strategy continue (Wal-Mart 2011). The price consideration in selecting the supplier for raw material may create problem for Wal-Mart as it would affect its supply chain management. To reduce this problem, management of Wal-Mart should consider developing velocity, flexibility and quality in selecting suppliers as it would be effective to reduce cost and to maintain lower cost level (Hoppenstedt & Rathkolb 2005). Inventory:

Inventory is also an important element of supply chain management as it is essential for management to determine appropriate level of inventory within the business to increase competitiveness. For effective management of inventory, WalMart focuses on day to day stock bases through Radio Frequency

Identification (RFID) technology. It is a technology that is basically used to track remaining goods within organization (Wal-Mart 2011). By this technology company can identify product availability through bar codes that are printed on them. The more traffic in network may create problem in effective utilization of this technique and may interpret wrong information that may affect the organizational effectiveness (Hugos 2006). Increase in server database, continuous improvement in technology will be effective to minimize impact of this technique over supply chain management. Location:

Location is also an important part of business as it determines success of the business (Lambert 2008). Wal-Mart emphasizes on customer demands and determination of customers satisfaction in determining places for its stores. Identification of customer demand helps to determine the locations for store and production facilities close to the consumers (Wal-Mart 2011). The selection of inappropriate locations in other region without considering income level and living standard of the customers may create problem for Wal-Mart in location selection. The analysis of macro and micro environment before selecting location would be effective to increase the supply chain

management of the organization (Lambert 2008). Transportation:

Transportation is intimately related to inventory decisions and also with the customer requirements (Bolstorff & Rosenbaum 2007). Wal-Mart uses stores to offer its products to the customers and by its own trucks for delivery (Wal-Mart 2011). The use of store and its own truck for transportation may create problem as strike by the employees may affect the delivery of its goods to the customers that would affect its market share and customer base. To eliminate this problem, management of WalMart could make arrangement with external transportation companies that will be used in the situation of strike (Bolstorff & Rosenbaum 2007). Information:

Information is an important component of the supply chain of an organization as it includes collection of information from end-users and to link them with resources (Li 2007). Wal-Mart is using linked computers through the internet to execute information globally. All the stores globally are connected with each other that help to get customer feedback and information and to implement them within the business (Wal-Mart 2011). The information sharing with global stores through the internet may create problem of misuse of data and theft of data. To manage this problem, organization should use proper security and password protection for using information.

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The importance of logistics systems lies in the fact that it leads to ultimate consummation of the sales contract. The buyer is not interested in the promises of the seller that he can supply goods at competitive price but that he actually does so. Delivery according to the contract is essential to fulfilling the commercial and legal requirements. In the event of failure to comply with the stipulated supply of period, the seller may not only get his sale amount back, but may also be legally penalized, if the sales contract so specifies. There is no doubt that better delivery schedule is a good promotional strategy when buyers are reluctant to invest in warehousing and keeping higher level of inventories. Similarly, better and/or timely delivery helps in getting repeat orders through creation of goodwill for the supplier. Thus, as effective logistics system contributes immensely to the achievements of the business and marketing objectives of a firm. It creates time and place utilities in the products and thereby helps in maximizing the value satisfaction to consumers. By ensuring quick deliveries in minimum time and cost, it relieves the customers of holding excess inventories. It also brings down the cost of carrying inventory, material handling, transportation and other related activities of distribution. In nutshell, an efficient system of physical distribution/logistics has a great potential for improving customer service and reducing costs.

Logistics has gained importance due to the following trends Raise in transportation cost. Production efficiency is reaching a peak Fundamental change in inventory philosophy Product line proliferated Computer technology Increased use or computers Increased public concern of products Growth of several new, large retail chains or mass merchandise with large demands & very sophisticated logistics services, by pass traditional channel & distribution. Reduction in economic regulation Growing power of retailers Globalization As a result of these developments, the decision maker has a number of choices to work out the most ideal marketing logistics system. Essentially, this system implies that people at all levels of management think and act in terms of integrated capabilities and adoption of a total approach to achieve pre-determined logistics objectives. Logistics is also important on the global scale. Efficient logistics systems throughout the world economy are a basis for trade and a high standard of living for all of us. Lands, as well as the people who occupy them, are not equally productive. That is, one region often has an advantage over all others in some production specialty. An efficient logistics system allows a geographical region to exploit its inherent advantage by specializing its productive

efforts in those products in which it has been an advantage by specializing its productive to other regions. The system allows the products landed cost (production plus logistics cost) and quality to be competitive with those form any other region. Common examples of this specialization have been Japans electronics industry, the agricultural, computer and aircrafts industries of United States and various countries dominance in supplying raw materials such as oil, gold, bauxite, and chromium. Furthermore Logistics has gained importance in the international marketing with the following reasons: 1. Transform in the customers attitude towards the total cost approach rather than direct cost approach . 2. Technological advancement in the fields of information processing and communication. 3. Technological development in transportation and material handling. 4. Companies are centralizing production to gain economies of scale. 5. Most of the MNC organizations are restructuring their production facilities on a global basis. 6. In many industries, the value added by manufacturing is declining as the cost of materials and distribution climbs. 7. High volume data processing and transmission is revolutionizing logistics control systems. 8. With the advancement of new technologies, managers can now update sales and inventory planning faster and more frequently, and factories can

respond with more flexibility to volatile market conditions. 9. Product life cycles are contracting. Companies that have gone all out to slash costs by turning to large scale batch production regularly find themselves saddled with obsolete stocks and are unable to keep pace with competitors new-product introductions. 10.Product lines are proliferating. More and more product line variety is needed to satisfy the growing range of customer tastes and requirements, and stock levels in both field and factory inevitably rise. 11.The balance of power in distribution chain is shifting from the manufacturers to the trader.