Supply Chain Management, Inventory and Demand

Introduction

The effectiveness of a supply chain is appraised basing on the objectives that it is set to achieve, both in the short run and in the long run. Consequently, the objectives of a supply chain will differ from one organization to another, depending on the overall corporate strategy that a particular organization has put in place and which the current supply chain seeks to achieve (Hatesh, 2007). Similarly, many organizations always seek efficiency and effectiveness in its supply chain management using criteria that are clearly outlined in the supply chain objectives.

Examples of supply series objective includes but not limited to achieve Cost Efficiency, Total Quality Management Of Inventory, Just In Time (JIT), Just Enough Objectives, Continuous Improvement among Others (Kaizen & Kaiban Objectives; Jonathan Wright et al., 2007).

Vacumet Coating Company (VCC) is no exception. In the establishment of a viable supply chain, Frank and Williams must set clear objectives that will enable the company to appraise the supply chain performance (SC control). However, establishment of an efficient and effective supply chain is not always without challenges. It sometimes fails to meet the objectives hence helping management to identify points of its inefficiency or ineffectiveness (David, 2008). It is these points of ineffectiveness and inefficiency in the SC that form the symptoms of a problematic supply chain. In this section, we discuss the symptoms of supply chain problems; identify the causes of some supply chain problems and how an organization can solve the problem identified.

Common Symptoms of Supply Chain Problems

Cost Inefficiency

Cost inefficiency in a supply chain is realized when there are excessive costs of inventories in the organization. In circumstances where the organization is incurring excesses of inventories cost (more than what is normal as far as the industry is concerned or fails to conform to the overall cost structure or objective), it is an indication that the supply chain is inefficient i.e. it has some serious cost control problems. This is particularly so because many profit making organization aims at cost minimization on inventories to support its pricing strategy and for profit maximization (David, 2008). In the case of Vacumet coating company (VCC), its current supply chain has been faulted as having cost excess as one of its problems.

Poor Inventory Level Control

An efficient supply chain is the one that is able to provide the company with the most effective and accurate tools of inventories control (Cooper et al 2007). Such tools provide modern and accurate inventory and demand forecasting techniques, accurate calculations of inventory order size, guides production levels and ensures accuracy in inventories relatives to both the company production capacity and the market demand.

Where the supply chain fails to offer the best level of inventories control, there are cases of either excess or shortages of inventories in the organization, leading to either wastages or disruptions in the production process of failure by the organization to meet the market demand (Hatesh, 2007). At VCC, the current supply chain had an acute problem (in this) as the company was often faced with excesses of materials or acute shortages of inventories forcing them to expedite at the last minute in an effort to avoid failing to meet the customer demand. This is because the SC could not effectively control the level of inventories and demand (forecasting inefficiency) hence a sign of problem in the supply chain.

Poor Inventories Quality Control

An effective supply chain ought to achieve the highest and the best level of inventories quality (Cooper et al., 2007). If the SC fails to achieve this objective, which will be indicated by poor quality of inventories, high order returns and low overall quality of the chain depicted in the low quality of products, and massive fluctuation in inventories or materials quality (lack of quality consistency), it is an indication that all is not well in the supply chain i.e. major problems exists in the SC.

High Suppliers’ / Buyers Turnover

A supply chain that is characterized by massive suppliers’ turnover is a clear depiction that it has problems (Hatesh, 2007). It is indeed an indication of poor relations among the parties that makes up the chain and which is an indication of imminent supply chain failure or poor performance. High suppliers or buyers turnover is a clear symptom of deathly problems within the supply chain.

Long Lead-Time and Inventories Delay

In circumstances where orders take unnecessary long to be processed, the lead time are particularly long i.e. it takes very long between the identification of inventories need and actual deliveries of such inventories and massive inventories delay (that halts companies operations) is an indication of gruesome problems in the supply chain. An efficient and effective supply chain is the one that is able to minimize the inventories lead-time and materials delay as well as one which can effectively expedite in cases of inventories need emergency (Jonathan Wright et al 2007).

Just In Time (JIT) Deliveries

A supply chain that fails to offer the organization a JIT advantage is ineffective especially in cases where the organization seeks to obtain competitive edge over other in the industry (Jonathan Wright et al 2007). Failure of the company’s SC to provide it with this source of distinct competence therefore is a symptom of a problem or inefficiency within the chain.

Cost Ineffectiveness in a Supply Chain

Cost reduction in a supply chain is a mounting challenge in supply chain management just like it is to achieve maximum supply chain effectiveness. According to David (2008) there are typically six causes of cost problems within a supply chain and which are interrelated. First they may be caused by failure by both the organizational management and the supply chain partners to clearly set and adhere to the supply chain cost objectives and goals.

This makes the supply chain lack anything to achieve cost wise and fails to provide the parties to the supply chain with the means to control or measure the performance of the chain as far as inventories costs are concerned. Also, if the size of the supply chain is so big and that involves very many activities confusion is likely to occur at the beginning particularly if there was inadequate initial planning, training and communication thus leading to cost problems in the chain.

The costs problems in the supply chain may arise if the organization uses wrong measurements to gauge the supply chain cost effectiveness (David, 2008). For instance, if the organization utilizes traditional financial benchmarks as the only measure of cost effectiveness in the supply chain such as the balance sheet profitability and revenues, the result may be misleading culminating to cost problems. Also existence of barriers and bureaucratic procedures in the chain leads to extra cost.

A supply chain is a back to back relationship among the firm and parties to it hence such barriers may be inevitable but can be lessened through effective appointment of supply chain partners. In addition, the often inflexibility/ rigidity / resistance to change by rather a single or multiple links that forms the supply chain especially if the latter are forced to adhere to strict guidelines may result in unnecessary cost increment.

Although there are multiple approach that can be affected to solve the cost problems in the supply chain, the best approach is to develop preventive measures instead of waiting until when a problem arises to solve it (Cooper et al., 2007). However, cost control in a supply chain should be carried out within a set of clearly set cost objectives. Also, the firm should develop a multifaceted or all inclusive measurement criterion to make conclusion of its success, maintain a highly flexible supply chain and flexible links and carry out careful appointment of partners to avoid barriers that may result in cost increment (David, 2008).

Poor Inventories Control

The main cause of this symptom or problem in a supply chain is lack of or poor demand forecasting tools and models in the supply chain. Lack of tools and accurate approaches for demand forecasting and failure by the supply chain partners to align such forecasting with the demand, sales, logistics inventories and production capacity will often result in material excesses leading to wastages or shortage rendering the firm ineffective in meeting customers/ market demand and deathly disruptions of the firms operations (Jonathan Wright et al., 2007).

Also, this problem may result from inadequate training and skills of the individuals involved in the sourcing of inventories. The best approach to solving this problem is to integrate modern technology in the supply chain that offer state- of –the- art technological tools and computer-supported models for maximum accuracy in inventory and demand forecasting. In addition, the human capital in the supply chain must be optimally developed through training to equip them with eventual skills.

References

Cooper C et al (2007) Supply Chain Management, More That A New Name For Logistics Inc The International Journal of Logistics Management Vol. 8 pp 1-14.

David H Taylor (2008) Supply Chain Value: The Causes of Cost Problems in the Supply Chain. Web.

Hatesh Attri (2007) Supply Chain Management: The Supply Chain Visibility and Sustainability: Harvard business school publishing. Web.

Jonathan Wright et al (2007) The Sustainable Supply Chain: Balancing Cost, Customer Service and Sustainability to Achieve High Supply Chain Performance. Web.