The supply chain being one of the major aspects of the organization’s activities must be addressed cautiously to ensure that an organization meets the demand of the customers as per their orders. The supply chain can be refers linking network between the suppliers of raw materials, production plant, and end-users, thus calling for proper management of the chain. Management of the supply chain is geared towards facilitating efficiency in dealing with customer orders and production procedures with a minimal operation cost (Blanchard, 2007).
Supply chain management ensures that raw materials are procured appropriately, the production process is conducted effectively and that customers’ demands are met adequately and timely. Supply chain management also ensures that customers receive value for their money by promoting customer satisfaction effort and striving to meet their demand specifications.
Restructuring of the supply chain
Complex supply chains and the operation of old traditional modes of supply chains have been the contributing factor to the skyrocketing supply costs in the plane manufacturing sector. This calls for an urgent need to restructure the supply chain process to ensure that costs are addressed and managed effectively. Proper restructuring of the supply chain procedures comes with a lot of advantages such as strictness to lead time requirements cost control techniques, quality products, and reduced chain of supply which aims at reaching the supplier of raw materials and consumers within a short period.
It is of great importance that the manufacturing firms design their production process in such a way that the production plant is located closer to the source of raw materials. This helps the firm to save on transportation costs which would have been incurred if the firm was located away from the raw materials. This saves on the supply chain cost. (Mentzer, 2004).
Effective traffic communication
Developing a communication framework between the suppliers and the manufactures will be an essential cost management tool in the supply chain. There must exist an effective two-way traffic communication process between the suppliers and the manufacturers to cut down on the long procurement procedures to be undertaken. Proper communication frameworks also assist the manufactures to get an automatic supply of raw materials without undergoing the normal procurement processes hence reducing costs (Larsen & Jespersen 2005).
Some form of collaborative planning and forecasting procedures in which the manufacturers engage the suppliers in their future activities and needs of the organization is equally required. This facilitates a continuous production process and avoidance of cost associated with time to time ordering and supply processes. Suppliers and manufacturers should have collaborative event management systems to ensure that all the stumbling blocks in the supply chain are eliminated. This also gives the manufacturers a chance to identify cost-cutting opportunities in the supply chain.
The manufacturers must construct or hire a warehouse as an important cost-cutting technique in the supply chain. Operating a warehouse enables the manufacturers to purchase raw materials in bulk, and relieves the firms from costs associated with frequent procurement procedures while at the same time cutting down on the supply chain costs (Mentzer, 2001). The manufacturers should also weigh the cost of outsourcing raw material supply procedures and the cost of private procurement. If the cost of outsourcing is less expensive then it should consider outsourcing rather than engaging itself in the supply process. Application of supply chain management information technology programs may be an effective approach to cost-cutting in the supply chain.
Firms will be able to accurately track and establish their needs especially for raw materials when they arise. This helps in avoiding any costs that would be associated with delays in the supply chain. The software will be necessary for integrating the activities of the manufacturing departments and those of the suppliers to ensure that unnecessary costs that would be incurred if the departments were operating independently are avoided.
Blanchard, D. (2007). Supply chain management. New Jersey: John Wiley & Sons.
Larsen, T and Jespersen, B. (2005). Supply chain management. Copenhagen: Copenhagen Business School Press.
Mentzer, J. (2001). Supply chain management.Carlifornia: Sage Publication.
Mentzer, J. (2004). Fundamentals of supply chain management. California: Sage Publication.