Supply Chain Management is a science of managing raw materials, finished goods as well as work in progress inventory of any organisation. For any organisatin the supply chain has to be more effiecient i..e reducing supply chain cost or more responsive to the customers need.The best supply chain management results in less cost of gIt includes three logistical drivers: Facilities, Inventory and Transportation as well as three cross functional drivers:Information, Sourcing and Pricing.
- Facility: Having more facility will make a supply chain more responsive. However, the fixed cost of warehouse will increase thus making it less effiecient. Also the location of the warehouse is also important. Generally raw materials are stored near the production sites and finished goods are stored near the customers site. Though there will be a warehouse at the production site to store finished goods.
- Inventory: More the inventory, better will be the responsive time as the customer will be able to chose. However higher inventory will cause higher working capital. This will increase the interest cost making it less effiecient.
- Transportation: Transportatin means the type of vehicle used for transportation as well as the frequency for transportation e.g. delivered once in a week. etc. As the frequency increases the company will have to use smaller vehicles on a regular basis increasing transportation cost. On the other hand, fewer deliveries means that the customer might have to wait for final goods.
- Information: These are softwares which allows to share information to various departments of an organisation. It also helps to planning production, and hence carry out forecast for raw materials. Thus it makes it more efficient. Also cost is being saved as less manpower is required to do the same accurately.
- Sourcing: It affects the production site. It depends on how much the material the factory will produce and how much it will outsource to save its production cost. However, as the factory will outsource its products, it will be dependent on the supplier and be less responsive.
- Pricing: Pricing depends on how much the company should charge for transporting the goods. As usual, more the price, the earlier the customer expects to receive the goods.