New Ways Are Hurting Old Businesses
New Ways Are Hurting Old Businesses
New Ways Are Hurting Old Businesses
New methods of doing business are taking customers away from traditional companies. The companies that are advancing have found proven ways to get ahead of their competitors. The evolving businesses have figured out better ways to cut costs and increase efficiency between stations. The methods used are focused on bettering supply chain methods and reducing overall process time. In other words, new age businesses are concentrating on getting their products from the supplier, to the customer. Firms intend to do this in the best and efficient way possible.
When businesses are focussing on efficiency, it becomes easier to respond towards product demand. When considering this in the chain of distribution, the supplier knows right away when certain inventory needs to be replaced. When there are less products available on the shelf. This way, demand is being matched in real time, and less storage space is being used for inventory. Less storage space is being used because there is a focus on just-in-time processes. Businesses strive to have inventory arrive as soon as its needed. When thinking in terms of benefits, firms are able to cut costs in the long run. Short term investments are made on technology and knowledge. However, the results do pay off, and the investments do get recouped. This is because firms are able to get the product out to their customers quicker. When they do this, the customers are satisfied because their needs are met. Satisfied customers bring growth to the company.
Old businesses that still retain traditional methods are being left out. They refuse to spend money and take calculated risks. When this is the case, their is less control over inventory and the cycle time is a lot longer. Therefore, the product gets out to the customer later than expected. This can lead to additional inventory being accumulated, inventory that is not being purchased by customers. This inventory requires storage and warehousing space, which costs money. Effective businesses don't allow inventory to be accumulated. To be specific, traditional businesses may use phone calls and sales forecasts to make more predictions. When the business is not advancing, sales become volatile and less predictable.
When considering improving businesses, most of the time, inventory is in transit with suppliers because the product is delivered as soon as its needed. When the product needs to be replaced on a store shelf, costs for storage space is reduced and the products get to the customer on time. The inventory is either being delivered or on a store shelf, there is little time for it to be in a warehouse. When following this procedure, the demand for the product is matched effectively. Wal-Mart is a perfect example for this. Customer takes a product off the shelf, brings it to the cashier, the cashier scans the item. Right away, the supplier knows one piece of inventory is needed. That one inventory item needs to be replaced. This instantaneous flow of inventory will help a business succeed. It is when there is good collaboration between the supplier and retailer, we find an effective supply-chain model.
Businesses should start moving towards new ways of decreasing cycle time. Basically, reduce the time it takes for a product to get from the supplier to the customer. When this happens, not only is the customer happy, so is the business owner. The owner is happy because he or she reduced costs on warehousing. Also, changing businesses will get an edge on their competitors. By investing in technology and focussing on new ways to improve efficiency, companies will be immune in developing industries. Another crucial element will be on improving logistics, delivery methods between the supplier and retailer. By using networking based solutions, and moving away from brick-and-mortar methods, a business is able to keep up with the needs of customers. A businesses that wishes to evolve in a globalizing world, should focus their effort towards supply chain management.
Written by Basim Mirza
http://www.basim.ca
Sources Used
Supply Chain Management: Strategy, Planning & Operation (3rd Edition). New Jersey, 2007. Sunil Chopra & Pete Meindl.
Operations Management (Edition 9). Ohio, 2002. Norman Gaither & Greg Frazier.
Wal-Mart Stores. Wal-Mart Global Procurement Enhances Quality Control in China. [13st July 2009].http://walmartstores.com/FactsNews/NewsRoom/8437.aspx
Wal-Mart World. The Biggest Corporation in the Global Economy. [14th July 2009].http://www.scdigest.com/ASSETS/ON_TARGET/09-06-09-2.PHP?CID=2506
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