Let us start by explaining What Is Supply Chain Management? In simple words, supply chain management overlooks the entire flow of products, data, and finances related to any service or goods. The supply chain management is responsible for the procurement of raw materials up till the delivery of the final product to its destination.
Supply Chain Network Design as a whole is the strategic planning of the supply chain operations that ensure long-term benefits. It involves measuring cost, time, location, production facilities, logistics, and the best mix of suppliers, for optimum product manufacturing and distribution. Furthermore, Supply Chain Network Design also takes into account the sources to procure raw materials, transportation of finished products, storage, warehousing, and ways for delivering goods to consumers.
Supply Chain Network Design, thus is a complex and ever-evolving process that uses mathematical models, algorithms, linear programming, and other software to create supply networks for any enterprise and ways to optimise them.
Key Benefits of Effective Supply Chain Network Design
An effective supply chain network design helps a company or an enterprise in visualising and planning their supply chains to derive the maximum profit. It plays a key role in reducing overall costs, reducing risk, enhancing service, and delivering speed-to-market. Below is a list of the key benefits:
Identifying parts that are potential cost savers
Reduction in inventories and purchase costs
Reduction in transport costs
Reduction in both fixed costs (equipment, facilities) and variable costs (labour, handling charges)
Discerning routes for reducing fuel costs and transit time
Optimisation of services, delivery dates, and customer satisfaction
Transparency in the overall process and cost across the supply chain network
Providing opportunities for the performance of the overall supply chain network by evaluating the costs incurred against set benchmarks
Factors that ensure an effective Supply Chain Network Design
As an organisation, you must focus on the planning of the following key areas to build a strong and effective network design in the supply chain:
Gather supporting data
To design an effective supply chain network you need fool-proof data to back up the decisions. This is one of the most crucial and time-consuming parts of the design process. However, the good news is that a lot of details and data can be obtained from the company’s ERP or legacy system. Some intricacies of the data include the type and quality of raw material, source of raw material, warehousing cost, transport container type, transport cost, and inventory cost.
Procurement costs and processes
The cost of the entire process needs to be carefully analysed. This includes the source to procure raw materials, time, distance, location, and shipping method. Other typical information like capacity, flexibility, and lead time must be finalised. Furthermore, the number of manufacturers and suppliers also needs to be identified.
Logistics and transportation
One of the key aspects of effective planning includes transporting raw materials and delivering finished goods. The planning must include route scheduling, optimising logistics, and ensuring timely and systematic transportation of products or goods. This operational procedure determines the smooth functioning of the entire supply chain process.
Inventory management and planning
This is one of the trickiest factors in managing an effective Supply Chain Network Design. The ideal inventory level needs to be identified that will be transported and stored. Also, the response time to fulfil the demand for goods needs to be chalked out.
Placement of warehouses and distribution centres
Supply chain nodes must be defined accordingly for accurate locations. This also includes finalising the optimum number of distribution centres and warehouses that will assist a strong supply chain network.
Implement and refine
The design of the supply chain network is an ongoing process. It needs to be implemented, analysed, and adjusted to changes for increased cost savings. Changes like a large and new customer base, new location, increased demand, increased production capacity, or a swing in prices of raw materials must be considered. Thus, like all efficient planning processes, supply chain network design should be revisited regularly.
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The supply chain network design segment is emerging as a tremendous career growth that comes with ample job opportunities to drive professionals to enter big companies. Sign up for Supply Chain Management Course to learn skills of higher management levels and reap monetary benefits as you contribute massively to your organisation.