Today, I will be looking at component parts of a supply chain and how they operate together.
All businesses strive for growth, but this can be achieved by many different means. The question is how to compare strategies and decide which is best. The Ansoff Matrix is a toll that helps businesses to analyse different strategies for growth and attaching levels of risks when looking at different strategies.
First published by mathematician Igor Ansoff in 1957. The matrix concentrates on two main areas of activity: Products and Markets. Within those areas, we consider current and already existing activities of the business and new activities. The new activities could be new products and markets which can be developed.
The matrix has four main zones, both new and existing areas for each of the Products and Markets zones.
1) Current products and markets: Market penetration - this is the comfort zone of existing products being supplied to existing markets.Within this zone there are still growth opportunities. For example getting more customers within the market. Within this market strategy there are relatively low risks. The products and customers are known already.
2) New products for current markets - Product development - this strategy requires development of new products to existing markets. Market share is increased by selling new products to existing customers already familiar to the market and building to the brand name.
3) New markets for current products - Market development - this strategy involves creating new markets to existing products. They can be promoted to appeal to new group of customers. Marketing activities are especially important for Market development strategies.
4) New products and new markets - Diversification - this strategy involves identifying new markets in which the business is currently not active and developing new products to sell to them. This is the highest risk strategy with the most unknowns. Diversification is further divided into Related diversification and Unrelated diversification.
The Ansoff matrix is a valuable tool for business management, sales and marketing. It helps to plan for growth within coherent business model.
Supply chain components
Supply chain will involve people and processes who contribute to product production, delivery and sale. These also involve external sources, for example dealers, distributors, warehouses, delivery companies and suppliers. The supply of materials from suppliers, manufacturing process and distribution of goods would be the main components of the supply chain. It is done within the flow of goods, information and finances.
The chain also consist of activities which add value to the product. Relevant primary and support activities are involved.
Primary activities
Inbound logistics would be where the goods are received from suppliers and stored until they are used in the production process. Operations would be where the product is produced or assembled. The goods are now ready to leave the business and being sent to retailers, distributors or directly to customers (Outbound logistics). Marketing and sales will be involved in the promotion of the product and target the customers. And finally, After-sale activities are involved which would be the management of installation, queries or handing compliance.
Supportive activities
The department responsible for purchasing and souring will be the Procurement department. These activities will involve raw materials, components and supporting services. The purchasing department will focus on buying at competitive price, quality and maintaining accurate stock levels. Innovation take place and thats where Technology comes to play. There are needs to developing new products and to be improving those which are already in the market.
One of the biggest expenses in organisations are people. Human Resources departments will be responsible for hiring, managing and training people to work effectively.
All the supporting activities are equally important.
Controlling Chaos
If there are no clear plans, too much time spent on firefighting, investigating noise and problem solving, there will be no time for effective planning for the future.
The supply chain depends on accurate information and planning that is achievable. Data accuracy will allow accurate forecasting, stockholding, scheduling and setting priorities which will help to manage the supply chain more effectively.
Additionally, the processes should be made as simple as possible with least errors having chance of occurring. Support IT systems will play a crucial roles here.
Process ownership is also important. We want to ensure appropriate and competent people can manage and set the processes.
Finally, there is a need for optimising and improving performance. If the managers have no time to think and plan for improvements, there is a room for failure.
Flow of information
The supply chain will have a high level of information produced all the time. This information flow need to be organised to ensure everyone knows the information they need to know.
Suppliers will produce information relating to costs and availability of materials, new materials, different prices or delivery times. These information are also often gathered by firms to evaluate their supplier performance.
Purchasing departments will require information of accurate prices, available alternatives and the reliability of the suppliers.
The production will need the formation on materials, problem and quality issues with raw materials.
Distribution will provide information on delivery times, delays, costs of warehousing.
and finally customer will handle information on product quality, desirability of the product or service and acceptability of the price.
Monitoring supply chain
The supply chain can only be successful with robust processes from start to finish. From the sourcing and purchasing of production materials to final delivery to customer. There are some steps to consider to ensure this can be achieved.
1) Map current processes in the organisation. Business rules and information flow need to be considered. The mapping need to be linked to the business mission and strategic goals. Considerations of automation will be important.
2) Consider how the processes are linked. Detailed process map need to be completed here as well as clear and logical flow of information.
3) Consider relationships with external sources.
4) Make recommendations for improvement and implement them.
Planning for disaster
Sometimes the unnexpected happened and customers will still want their goods to be delivered. The organisation need to be reliable and built in contingency plans into their processes. Sometimes putting in place more employees would be a solution, but it can become very costly. One option could be to subcontract some services to other organisations.
The most common contingencies are Time and Cost. It is important, to have some flexibility in the process to allow for delays. This will ensure that projects will still complete on time. It is also important to have aside some budget that can be used in case of overrun of some costs.
Environmental considerations
In the past much of the focus was on lowering the costs and reducing times within the supply chains. But today, there is an increased interest in the sustainability of the supply chains. Reducing packaging, coordinating deliveries, using environmentally friendly approaches and waste reduction has been a topic of many organisations.
Some organisations looking at environmental impact from every process in the business the taking the science of sustainability to the next level.
Summarising, supply chains need to be managed effectively. Whether it is within the current markets and products or new ones. There is no one part of the supply chain that is more important than another. Poorly managed supply chains can have damaging results. Supply chains can be complex therefore there is a likelihood that some chains are broken. Careful planning and mapping up processes would be a helpful tool for successful supply management.
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