The Reason for the Supply Chain to Have Become Critical
Since the days of the Industrial Revolution the supply chain has been important. But, today it has become critical. A producer today cannot think beyond his supply chain. It was not so in the days gone by. Henry Ford possibly never bothered about his supply chain. This was because he owned every single unit of the supply chain. If he needed wood for his cars, he owned a mahogany forest. If he needed steel, he owned steel mills. Similarly, he owned rubber plantations and therefore never really bothered much about how he would get the tires for his automobiles
Today, every manufacturer worries about his supply chain which has becoming critical to his manufacturing capability. Supply chain management therefore poses a great challenge to the success of several businesses. The supply chains of today are considerably different from the days of Henry Ford since all items in the supply chain have now been outsourced and today one only needs to concentrate on their core competencies.
With globalization we are totally dependent on the suppliers who may well be on the other side of the world. Therefore, today supply chain management solutions have to be found for all kinds of problems that are vexing the supply chain management. Since the time we started outsourcing the items globally for the supply chain we realize we have to retain certain degree of control over it and this is a reason critical enough for the supply chain.
Globalization is the First Challenge
Globalization is both the strength of supply chain as well as its main challenge.Globalization is important as that will ultimately help cut costs. Companies have today relocated their manufacturing to diverse countries all around the world so that both direct and indirect costs are reduced and the taxes are minimized. At the same time it is due to these global suppliers that lead times are extended and this does not go well with customers who want to pay lower prices as well as prefer on-time delivery of their products.
Satisfying the Customer
It is owing to the Internet and the social media that customers are fully aware of the range of products and their advantages and disadvantages. Customers have their preferences and the challenge of the supplier to satisfy each one of these is one of the greatest challenges. Innovation is the only answer to this challenge and it is innovation that helps keep the companies ahead of the competition.
Companies are continuously attempting to reduce costs and for this to happen they need to obtain information regarding their suppliers so that they can make the best procurement decisions. In order to reduce their costs of supplier sourcing and procurement, businesses have taken on the task of managing the online buyer and supplier community.
An efficient supply chain will allow a company to assess quickly the ability of the supplier to meet all the regulations dealing with issues such as financial and legal besides safety, environmental and quality. Flexibility is the key here for risk management since such regulations invariably differ based on the customer and the local standards.
A Need for Increased Transparency
There is a need to have an increased transparency since the global business will require a single point for accessing different aspects of supplier information. With the help of a supply base that is transparent, the operators of a global supply chain will be able to identify various suppliers that are reliable all over the world.
Finally, businesses survive due to market growth. Companies will need to fund new products from their R&D effort. The other requirement is to continually expand the distribution of products to diverse emerging markets so that there is a growth in revenue as well as an increase in the market share.