The Importance of Logistical Success of Supply Chain Management

Week 5 Assignment

The Importance of Logistical Success of Supply Chain Management

MGT 323: Principles of Supply Chain Management

Introduction

The Council of Supply Chain Management Professionals state that Supply Chain Management (SCM) is an integral part of most businesses and is essential to company success and customer satisfaction (2018). Supply Chain Management (SCM) also plays a crucial role in society as well as the economy. SCM knowledge and capabilities can be used to help complete medical missions, manage disaster relief operations, and assist in other types of emergencies. Supply Chain Experts work hard whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, the experts put much time on tasks and completing them. Problems are diagnosed, disruption avoidance is done creatively and products are disseminated creatively and efficiently. Logistics is an essential component of supply chain management. Logistics comprise of the planning, carrying out and management of goods, services and information from the point of origin to the point of consumption. Logistics supports the complex pattern of traffic and transportation, shipping and receiving, import and export operations, warehousing, inventory management, purchasing, production planning and customer service. Logistics is a critical component of a company’s Supply Chain Management System. Used to manage, coordinate and monitor resources needed to move products in a smooth, timely, cost effective and reliable manner is the basis of a good logistical system.  Highly successful Supply Change Management Systems boost customer service, reduce operating costs, and improves a company’s financial position.

Boost Customer Service

Customer service is the bloodline of any successful business. Without customers there would be no business. There would be no business without products or services. The two work hand in hand, customers and services/products. Supply Chain Management play a critical role in customer service. The customers expect to receive the purchased products/services and an accurate quantity to be delivered (CSMPC, 2018). There are a number of expectations that customers have for companies and the expectations are realistic and warranted. Customers expect products to be delivered to the correct location, in the designated time specified. The request is reasonable and expected by all customers. Immediately after the sale is made and the product is received, an expectation of product support should be employed. If a company is able to master the tasks mentions a boost in customer service is imminent.

Great customer service really helps a company to thrive in business. For example, President/COO Dan Cathy did not invent the chicken or the chicken sandwich however Chick-fil-a has some of the best document customer service in business. Although the chicken sandwich has a wheat bun, chicken patty and pickle sold at an above average price the customer service makes the company second to none. SAS Insight 2018 states Chick-fil-a is the second largest quick-service chain in America, Chick-fil-a does more in six day weeks that most restaurants do in seven, and the employee turnover is extremely low. The boost in customer service is directly tied to the Supply Chain Management System adopted by the company.

Reduce Operating Costs

There is an overall reduction in operating costs when a company efficiently handles purchasing, production, and total supply chain costs. Holding costly inventory in a warehouse over a long period of time cost the company money. Good Supply Chain Management helps keep the cost low by shipping out the expensive inventory effectively. For example, a name brand 60 inch plasma television require fast shipping to avoid high inventory costs for storing it. Supply Chains are to consistently deliver materials to assembly plants to avoid material shortages that would shut down production to manufacturers. For example, an unexpected parts shipment delay that causes an auto assembly plant shutdown can cost $20,000 per minute and millions of dollars per day in lost wages which constitutes production costs increase. “Manufacturers and retailers depend on supply chain managers to design networks that meet customer service goals at the least total cost. Efficient supply chains enable a firm to be more competitive in the market place. For example, Dell’s revolutionary computer supply chain approach involved making each computer based on a specific customer order, then shipping the computer directly to the customer. As a result, Dell was able to avoid having large computer inventories sitting in warehouses and retail stores (CSCMP, 2018).”

Increase in financial position

Companies are in the business of making a profit. Supply Chain Management plays a significant role in the profit because it helps control and decrease supply chain costs which directly affects the company’s profit margin. If examples if consumers eat 2.7 billion packages of hotdogs annually, therefore decreasing the supply chain coat by one penny would result in 13 billion dollars saved. This increases the profit leverage. SCM are valued because of the decrease of using la2ge fixed assets such as plants, warehouse and transportation vehicles in the supply chain. Eliminating the expensive warehouse buildings assists in decreasing the fixed assets. Lastly an increase in cash flow is what running a company is about. Supply Chain Managers play significant role in the speed of delivery of the product which directly affects the money coming into the company.

An increase in financial position is the basis for organizations which goals are to make a profit. Being able to leverage the supply is very important to the success of the companies. In fact any company offering goods/services need to master this task.

Logistics and its Role

Michigan State (2018) stated the following:

As the global economy moved into the 21st Century, logistics became a critical part of supply chain management and consumer demand. In less than two decades, logistics management has influenced product movement to meet or exceed consumer demand. Companies saw they could lower costs and increase productivity by managing logistics on a system theory and managing the company as a whole to boost performance.

By creating partnerships with suppliers, shipping services and warehouses, and connecting these services through automated systems, the logistics of getting products to the consumer are improved with reduced overhead costs and faster delivery. Understanding how the logistics system theory works requires strategic planning when calculating what will be needed, while focusing on obtaining materials and managing how quickly products are produced to help ensure swift delivery to the consumer.

Simplifying communication and services between multiple departments helps create a workflow blueprint that reduces costs by increasing visibility and improving the overall understanding of company needs. Cost savings is created by reducing warehousing costs and purchasing based on supply forecasts, better inventory management, reliable shipping and timely delivery to the end-user.

Michigan State (2018). Why is Logistics Fundamental to Supply Chain Success. Retrieved from https://www.michiganstateuniversityonline.com/resources/supply-chain/logistics-fundamental-to-supply-chain-success/#.WzF7JS3MzR0

Conclusion

Highly successful Supply Change Management Systems boost customer service, reduce operating costs, and improves a company’s financial position. Supply Change Management is of vital importance when it comes to company success and failure. Companies that have thrive in business have adopted systems and procedures which have capitalized on great best practices.

References

Council of Supply Chain Management Professionals CSCMP (2018). The Importance of Supply Chain Management. Retrieved from https://cscmp.org/CSCMP/Develop/Starting_Your_SCM_Career/Importance_of_SCM/CSCMP/Develop/Starting_Your_Career/Importance_of_Supply_Chain_Management.aspx?hkey=cf46c59c-d454-4bd5-8b06-4bf7a285f c65

Kanani, R. (2011, December 8). An interview with Dell’s procurement director on environmental sustainability (Links to an external site.)Links to an external site.An interview with Dell’s procurement director on environmental sustainability (Links to an external site.)Links to an external site.. Forbes. Retrieved from http://www.forbes.com/sites/rahimkanani/2011/12/08/an-interview-with-dells-procurement-director-on-environmental-sustainability/#7e19fd2a56f0

Knauss, D. (2010, January 19). The role of business ethics in relationships with customers (Links to an external site.)Links to an external site.. Forbes. Retrieved from 
http://www.forbes.com/2010/01/19/knauss-clorox-ethics-leadership-citizenship-ethics.html

Michigan State (2018). Why is Logistics Fundamental to Supply Chain Success. Retrieved from https://www.michiganstateuniversityonline.com/resources/supply-chain/logistics-fundamental-to-supply-chain-success/#.WzF7JS3MzR0

SAS Insight (2018). Retrieved from https://www.sas.com/en_us/insights/articles/marketing/a-lesson-in-customer-service-from-chick-fil-a.html

Wisner, J.D., Tan, K.-C., & Leong, G.  (2012). Principles of Supply Chain Management (3rd ed.). Mason, OH: South-Western Cengage Learning.  ISBN: 9780538475464