Essay on Supply Chain Management: Challenges of the Supply Chain Management
Author: Thomas Hill
Author: Thomas Hill
The main goal of any business concern is to meet the two broad objectives of reducing cost and obtaining the maximum customer satisfaction. If the business world was a quiet and fully predictable environment, these objectives can be met easily. The challenge in meeting the objectives are maintaining a permanent balance between demand and supply as shown in Figure 2. Any company in the world faces unexpected events every day in its supply chain operations. Analyze the "domino impact" of an unexpected event by using the example of a supplier calling to inform that a delivery scheduled for the next day will be 10 days late because of an internal problem (a strike, a quality issue, or whatever). First of all, once the problem has been acknowledged, the company needs to check the consequences of this late supplier delivery on the production schedule. Because of the delayed component, some of the production orders probably will need to be started at a later date than previously scheduled. This postponement can actually generate simultaneously five different types of imbalances between demand and supply: The late supplier delivery creates an unexpected volume of available capacity during a certain period. It also creates a capacity shortage in the following period, where the delayed orders will be competing for the capacity that may be already allocated to other orders. The delayed production orders may end up affecting the distribution plan. These delays in the distribution plan may force the company to break the delivery promises made to customers based on the original supply plan. Finally, the purchasing plans for the components that were supposed to be consumed in production orders together with the supplier's delayed component specify purchases that will arrive at the company's docks too early, compared with the updated need. This is a challenging situation. Because of one single unexpected event, the company is now faced with a complex re-planning situation, where a large number of decisions have to be taken to restore the balance between demand and supply at every level. Unfortunately these decisions cannot be taken sequentially, because they are all inter-related. For instance, the decision to anticipate some production orders to solve the capacity issues must be based on a material availability check to ensure that this decision is feasible. Also, the financial impact of these re-planning actions must systematically be assessed, or else the company's profitability may suffer. For instance, if the company has to decide which customer delivery will be postponed, it should base this decision on the profitability of each order. But the core challenge is the speed of re-planning. It is difficult for the companies to close this re-planning cycle with its current Supply Chain Planning processes. Expect for a very select club of the few companies that have reached a good level of Supply Chain Management optimization, probably for total re-planning the cycle time may range from 5 to 20 days, depending on the magnitude of supply chain. In other words, a company is not capable today of permanently maintaining an optimal balance between demand and supply. A delay in the re-planning process can dramatically hurt the balance between demand and supply as illustrated in Figure 3. Such an imbalance eventually results in excess inventory, misused capacities and poor customer service. The unexpected events are plentiful, and can be grouped into two separate categories, manageable and unmanageable. A company can minimize the frequency and the magnitude of the unexpected "manageable" events by applying continuous improvement programs. Manageable events include material quality problems, cycle time variation, yield variation, production quality problems, capacity problems, engineering changes, etc. (In industries where the manufacturing process is unpredictable, like the semiconductor industry, the steel industry and the chemical industry, some of these events are actually unmanageable.) Some companies have done a very good job with TQM initiatives to reduce the impact of these unexpected events, but in any case perfectly predictable supply chain operations will not be attained anytime soon by any company. The "unmanageable" category includes events on which companies have no control because they come from the external marketplace. The most disruptive unmanageable events are order modifications requested by the customers on delivery dates, quantities, and specifications, as well as the periodic sales forecast updates, promotions, product listing and de-listing, etc. The unmanageable and manageable categories are, large complex supply chains having hundreds of unexpected events occuring every day, generating the need to trigger hundreds of re-planning cycles to maintain a constant balance between demand and supply. With this perspective in mind, probably the magnitude of the gap that exists between current Supply Chain Management processes and full Supply Chain Management optimization is very high. The author is an expert in wiring custom essays/dissertations in the field of marketing and operations management. He has been with the company for some years as a senior writer.About the Author:
Thomas Hill is one of the senior staff writers at essayacademia.com, specialized in dissertation writing for master and Ph.D. students. He has been with the company for over five years. EssayAcademia provides you with professionally prepared free draft for your dissertations. You need to place order for completed paper once you are satisfied with draft, for which you need to make no payment at all. To avail this unique service visit essayacademia now and place order for professionally prepared free draft