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Supply Chain Management (SCM)

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Introduction

Introduction Supply Chain Management is increasingly becoming an important aspect of any company's strive for efficiency and cost saving. Unfortunately, many of today's managers have misinterpreted the term to only withhold the activity of good management of suppliers. However, for a company to be cost efficient and productive the concept of supply chain management has to be thoroughly understood and the savings and risk reductions stemming from it have to be acknowledged. Supply Chain Management (SCM) is increasingly used as the new "buzz word" and managers proclaim its importance in business success. However, research has shown that although the majority of purchase managers may believe it to be of great importance, firms are not as committed to the concept as them might lead others to believe (Spekman, Kamauff and Myhr 1998, Tan, Kannan, Handfield and Ghosh 1999 and Smock, 2003). This pm will offer an introduction to the topic and present possible reasons for why the managers are "talking the talk, but not walking the walk". ...read more.

Middle

To explain it in another way, inventory is insurance for the company for unpredictability in future demand. Unfortunately it ties up precious capital. There are three separate sources of uncertainty; suppliers, manufacturing and customers. It is suggested by research that only analytical techniques or "darned good luck" can precisely tune a supply chain (Davis 1993). Possible reasons for lack of commitment There may be a number of reasons why managers are reluctant to invest in SCM activities. The following are thought to be the most relevant ones by the authors. Most companies will prioritise their own well being before their partner's. Therefore creating a win-win situation requires a high level of trust and equal opportunities for mutual benefits. Laying the foundations for such a relationship will demand resources in form of time as well as money. Inefficiencies in SCM may, as has been shown by consultants A.T. Kearney, may waste as much as 25% of a company's operating costs. ...read more.

Conclusion

Hence resources may be wasted on collecting the wrong type of/inaccurate information. Failing to take uncertainty into account may also be a potential pitfall. By not acknowledging this factor and making the appropriate allowances for it costly miscalculations may result. . Moreover, the actual factory capacity of the production may be unknown or miscalculated. If this is the case estimating possible improvements will be difficult if not impossible and the exact benefits of the scheme will not be felt. Conclusion Despite the clear evidence that there is a general lack of commitment in investing in SCM, it is felt that in the future the use of SCM will increase, since there is evidence that the trend in manufacturing is towards increasingly generic products. The past mistakes of companies such as HP and Lucent, who were left with redundant stocks, partly due to over-engineering, will be a lesson to future managers. By reducing the complexity of output it is therefore felt that suppliers will be more willing to hold an increasing amount of stock since this offers more flexibility to the buyer. ...read more.

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