SUPPLY CHAIN
Supply Chain Design
Since
a company’s supply chain encompasses virtually all of its
operating functions and facilities, its design is necessarily an
integral part of its strategic planning process.
For most companies the goals of their strategic plan are
often the same as the objective of supply chain management – the
prompt and reliable delivery of high-quality products and services
at the least cost. To
accomplish this requires strategic design decisions that effectively
coordinate all of the supply chain functions.
It is not surprising that many of the same strategic design
considerations for a quality management program can be applied to
supply chain design. The
level of interdependence and goal sharing makes the selection of
suppliers, also called sourcing, and the purchasing process, also
called procurement, important strategic decisions for a company.
Suppliers must be reliable in terms of quantity, timeliness,
and quality. Changing
suppliers frequently can lead to interruption and delays in the flow
of materials to the production process;
too many suppliers can be difficult to coordinate and
control; and too many suppliers can be risky, if they are not
reliable, and can cut down on competition and the incentive to keep
prices low. Suppliers
must be perceived as a virtual extension of the customer, operating
with the same goals and quality expectations. For
a company to achieve its strategic goals, it must control the bane
of supply chain management – uncertainty.
This requires identifying and understanding the causes of the
uncertainty, determining how it affects other activities up and down
the supply chain, and then formulating ways to reduce or eliminate
it. An effective means for identifying and reducing uncertainty
is to strategically apply the principles of TQM. Another
important aspect of supply chain design is communication and
information flow. Advances
in computer technology and the Internet have made it possible for
suppliers, customers, distribution centers, and shippers to
communicate almost instantaneously, thus enhancing the ability to
coordinate those different supply chain processes.
Computerized point-of-sale information can be transmitted
instantaneously via communication networks to distribution centers
and shippers enabling quick delivery to customers and quick
replenishment of warehouse stocks by suppliers. The types and number of facilities to construct and where to locate them are strategic design issues since transportation and distribution costs can be a significant part of supply chain costs. Facility and location decisions are costly, long-term commitments. They also dictate other design decisions including which suppliers to use, modes of transportation, distribution centers, and customer markets.
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