SCM Essay Example | Topics and Well Written Essays - 750 words

SCM - Essay Example There are various ways by which optimization of logistical networks can be achieved. SCM is therefore composed of several philosophies on how best to achieve its objectives of a fully-integrated chain of activities encompassing the movement of raw materials, the internal processing of these materials into finished goods inventory and shipping out these products into the market in the fastest and most efficient manner to achieve strategic marketing aims. This paper tackles the two types of systems commonly used today – the JIT and the MRP. Discussion The strategic concept of supply chain management lies in the realization that no single business entity is an island and cannot function optimally if it works entirely alone. The SCM idea is anchored on the dictum that a company providing products or services is nothing but a chain of continually evolving capabilities in a globalized marketplace (Jespersen and Skjott-Larsen, 2005:50); it combines its capabilities with the capabilit ies of other firms it deals with. Any discussion of supply chain management involves the subject of logistics. ... Logistics is a way to achieve superior customer service through a precise method of inventory management attained through having the right materials at the right time in the right quantities at a lowest possible cost at the right place. This obsession to have everything right is contained in the JIT or just-in-time management originally developed by Toyota Motors Corporation of Japan. The just-in-time philosophy - of inventory management is anchored on the simple but very profound idea that inventory supplies should not be delivered yet until when required. It therefore presupposes an efficient supply chain that delivers the needed materials just in time when these are needed at the precise moment during the production process to avoid a costly stock-out that disrupts entire production and raises costs or lowers profits. A guiding principle behind this seemingly simple idea is to let demand determine the supply. This simply means a part or material needed will be delivered only at th e precise moment it is needed, not a second earlier or a second later. Benefits of using JIT include smaller storage areas, lower operating capital needed for inventories and minimize need for big buffer stocks (Hensher, 2001:90). Another philosophy underpinning the JIT system is the pull concept of operating costs wherever along the chain. Besides determining the supply through the pull of the demand for a particular inventory item necessary for input in the next production process, JIT places a big emphasis on suppliers to the market a product that is affordable; their profits depend to large extent on internal operational efficiencies that allows profits at a price set by the customer.