Topic 5: Supply Chain Management
This week we move on from capital management to supply chain management. The first article offers an overview of what supply chain management is and the different stages involved in supply chain management. The second article provides further insights into ways CEO can improve the supply chain. The last article sheds light on supply chain financing, which helps firms build long-‐term relationships with suppliers.
1. This article by Bain and Company is a brief introduction into what supply chain management is about and how it is implemented. Supply Chain Management synchronised the efforts of all parties in order to deliver the right products to the right places at the right times for the right costs. The goal is to establish such strong bond of communication and trust among all parties that they can function as one unit and achieve total customer satisfaction.Implementing Supply Chain Management involve 4 stages: First, increase the level of trust among vital links in the supply chain, leading to long-‐term commitments with preferred partners. Second, increase the exchange of information to make sure the information such as demand forecasts, inventory levels, delivery dates etc. are accurate and up-‐to-‐date. Third, integrate the supply chain as one overall process rather than dozens of individual functions. Lastly, identify and implement radical ideas to transform the supply chain completely and deliver customer value in unprecedented ways.
http://www.bain.com/publications/articles/management-‐tools-‐supply-‐chain-‐management.aspx 2. Supply chain is much more than the cost of getting products into customers’ hands. In a broader sense, the supply chain could also include planning, information sharing, and value-‐adding activities, from raw material to final distribution. This article published by Mckinsey examines three ways CEOs can improve the supply chain. First, identify key strategy of the business, be it superior service, product innovation, or cost leadership, and ensure that supply chain is helping to deliver the key points of that strategy. Second, use sophisticated data analysis to manage supply chains end to end, across tiers and traditional functions such as marketing, manufacturing, and procurement. Third, set key performance indicators depending on the needs of the business, the product, and the market segment: the cost of production for value players, the stability of supply for staples and critical products, agility in volatile markets with fluctuating demand, and launch excellence for new products are essential.
http://www.mckinsey.com/insights/operations/three_ways_ceos_can_improve_the_supply_chain
3. This article from PWC is based around supply chain finance (SCF). Supply chain finance is the ability to provide suppliers with good financing facilities in order to be able to offer buyers longer payment terms, without harming supplier liquidity. The full process is that the supplier is paid by a financing facility, while the buyer pays the financing facility in fixed installments. This is considered the ‘procure to pay’ (PtP) approach for the buyer. This approach must have three distinct characteristics, invoice process optimisation, payment term enhancement, and optimized supplier payment cycles. With this process in place buyers can benefit from longer payment terms, higher liquidity, and longer-‐term relationships with suppliers. However, there are also risks involved, such as bank failure, the reclassification of the loan, and others as elaborated in the article.
http://www.pwc.co.uk/business-‐recovery/publications/supply-‐chain-‐finance-‐enhancing-‐working-‐c apital-‐performance.jhtml
In conclusion, supply chain management synchronizes the efforts of all parties—suppliers, manufacturers, distributors, dealers, customers, and so on—involved in meeting a customer's needs. Both the first two articles highlight the importance of supply chain integration in which sophisticated data analysis and freer exchange of information are essential. On the other hand, the third article elaborates on good supply chain financing, which contributes to long-‐term partnership with suppliers who play vital role in the supply chain.