The supply chain management aims to intensify the processes that take place from the level of the suppliers of raw materials to that of the end customers. The aim is to add value and to increase the use of resources and improve cost efficiency by transporting the required product at the designated time. The supply chain management emphasizes the mechanism of planning and control of the various economic flows from the raw material suppliers to the end customers.17 Cooper, Lambert, and Pagh explain supply chain management as, “the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.”
Implementation of effective marketing strategy requires supply chain management as it includes the distribution component of a marketing strategy. Also, companies following customer-centric marketing approach need to become responsible for supply chain management. With evolving business models and changing customer needs, companies will have to practice a demand-driven supply management. Moreover, market-driven firms will achieve a more competitive advantage by not only offering superior customer value propositions but by following a distinctive business system to support it. According to Srivastava, Shervani, and Fahey, customer relationship management, supply chain management, and new product development are the three core business processes which clearly contribute to generating and sustaining customer value and the role of marketing is to integrate these processes.
According to Marshall Fisher of the Wharton School, supply chain plays a “market mediation role” as the supply chain needs to ensure that the “variety of products reaching the marketplace matches what consumers want to buy.”Fisher suggests to follow supply chain strategies according to the product type and products usually fall into two categories – innovative and functional with each requiring different approaches to supply chain management. It is better to follow the time-tested supply chain model for functional products whereas for innovative products, a company should create a responsive supply chain structure to regulate the unpredictable nature of demand. In other words, functional products require efficient supply chain processes whereas innovative products require responsive supply chain processes.
1. Logistics Management and Supply Chain Management
There are many differences between logistics management and supply chain management. The organizational objective of logistics management is to reduce transportation costs and offer satisfactory logistics service to the customers. The objective of the supply chain is to reduce transaction costs and provide products to the customer in good quality. The notion of supply chain management is wider than logistics management. The supply chain provides the product-in-demand to the customer after the process of raw material purchasing, manufacturing, transportation and sales has been completed. On the other hand, the logistics management completes the fulfillment through the process of transportation, warehousing, loading, distribution, and processing.
Although logistics management and supply chain management have different characteristics, still supply chain and logistics are interdependent and cannot be separated. Logistics network is the core composition of the supply chain management, and supply chain cannot achieve its objective without an efficient logistics network. Suppliers, manufacturers, channel partners, and the end customer are not only the key node of the supply chain but also the start or end node of the logistics system. This comprises the logistics demand network and target customer network.
2. Advances in Supply Chain Management
A manager of a pharmaceutical company can check the real-time sales data with each of its channel partners, track and communicate with customers, monitor orders with the production department, and assess the location of shipments in their distribution network. The advances in the technology of supply chain management offer real-time demand response systems for decision-makers. New generation technologies are helping to propel “fast fashion” and “lean manufacturing”, so as to facilitate the delivery of products wanted most by the customers in an efficient manner.
Better data, decision-support tools, and incentives are required to move from simply managing supply chains for costs, compliance, and risk reduction to proactively predict and prevent unsustainable supply chain practices. Companies are using new technologies like “Adaptive Recognition & Information Assurance” (ARIA) to improve the efficiency of supply chain execution. ARIA offers a suite of mobile computing technologies, software applications, and other new business processes that work in harmony with operators in the implementation of warehouse transactions. Also, this platform minimizes the possibility of human error by integrating traditional barcode scanning, RFID and voice recognition applications.
Companies need to reinvent their supply chain as a digital supply network that combines not just a physical movement of goods but also talent, information, and finance. It is critical to integrate real-time secure data exchange, visibility, and traceability between different processes across multiple supply chains and business verticals. The significant barrier to the adoption of advanced technologies in supply chain management is a lack of understanding of the potential benefits combined with an expectation of high execution costs.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.