This essay was originally
written by me for an ongoing course
Supply
Chain Management-A learning
Perspective by by Bowon Kim of Korean
Advanced Institute of Sciences and Technology (KAIST).
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As a student of Mechanical Engineering,
a general understanding
of supply chain management leaves
me in utter wonder. Imagining
a parallel universe,
in which the laws of physics are the same but the firms are found running
without a supply
chain system, I see nothing
but destruction of time and resources. Now, whenever I hold the steering wheel of my car or pick some nuts to munch, I can’t help thinking about the chain of actions
and firms involved
in bringing such products to me at the exact time as I want them, in the best quality offered
and at exactly
the same place as I want them to be!
When we talk about supply chain the first thing that comes to the mind is mind boggling coordination
between the suppliers,
the manufacturers and the distributors
(S,M and D) to bring the product
to us i.e. the customers
(C), and that too at the right time, at the right place and at the most viable
cost. A constant
state of coordination
is what makes a supply
chain running all the time. Consider this: In a given supply
chain, the manufacturers
cannot work until they get the information
about how much product is to be manufactured. But how will they decide
the amount of product to be made? The answer
lies in the demand of that particular
product by the general public
(customers)! But how to create
demand? The marketers
have to work in close coordination with the distributors
to create the best possible
plan and get the people
to get attracted
towards the product.
But once the amount of product to me manufactured
is decided, the firm has to make sure they have the right amount
of raw material
for the manufacturing
operations to run smoothly and to avoid bottle necks.
So the manufacturing
department has to be in close coordination
with the suppliers
of raw material
at the same time too. All jumbled
up, isn't it? So when I tell my brother
that this shampoo
by company ABC is really
nice, in technical
terms I am saying: The coordination between
the members of the supply
chain of this company is so good that their company’s value is increasing
by each good comment I pass about them!
Now that we have seen the bigger picture
of how things
work in supply
chain, let’s come to the topic at hand i.e. Supply Chain – A Focal Company.
Either call it a limitation
or a kind of an insight, but supply chain management issues
are approached from a single
standpoint. Any given standpoint is basically a firm, company
or service provider
that is part of the overall supply
chain. Consider the example of a car manufacturing company
called an OEM (original equipment
manufacturer). The part supplying company,
the OEM itself
and the company
that distributes or brings the cars to the customers,
creates a single
supply chain. If we want to analyse
this supply chain to assess
the quality of their coordination,
the thing to be kept in mind is that our perspective
of this supply
chain is that of the car assembler
i.e. the OEM. So when we call the OEM, a manufacturer;
the part provider,
a supplier; and the show-room
office holder, a distributor, we are talking
about a supply
chain with the OEM as the focal company. But, if we change the way we see things
a bit, we realize that this OEM is actually
a customer of the part supplying company.
This particular part supplying company
has its own supplier of raw material,
say sheet metal,
and its own distributor, that brings the product to the OEM. So we realize that this whole business of who the manufacturer or the service
provider is, is purely subjective
and the issues
related to the supply chain can be seen from a single
perspective, angle, position
or standpoint at a time. In a nutshell, among the important
parts of the supply chain i.e. suppliers
(S), manufactures (M), distributors (D) and customers
(C) our perspective
of interest is the position
‘M’.
Being an undergrad student
I have a very limited
view of how the supply
chain actually works in real life but luckily I have had the experience
of working as an intern
in a local auto-mobile parts manufacturing company
in Lahore, Pakistan.
The company is called Hawks Engineering Works and specializes
in manufacturing sheet metal door hinges, door locks, door strikers and beam gussets
among other products
for OEMs like Honda, Suzuki,
Hyundai, Millat Tractors
etc. In the upcoming paragraphs
I will explain,
in terms of supply chain management, the perspective of this particular
firm.
As already explained,
in order to set a perspective to deal with supply chain issues we have to put the company of interest at the position
of ‘M’, so we put Hawks Engineering
Works at the “Manufacturer’s” position.
To manufacture
the parts, the company needs raw material
i.e. sheet metal.
The company has hired certain
material providers who provide the required raw material to the company.
Besides this, items of daily use including
stare parts for press machines,
oils, rivets, rods for welding,
drill bits etc. are to be bought
from vendors from a market
place called Brandreth
Road in Lahore,
to keeps things
running smoothly. Hence the company
has suppliers for each of these items who are kept in close coordination
with the company’s
manufacturing department. The importance of coordination of the manufactures
with the suppliers
can be understood
from the fact that the company cannot
afford running out of material
at a time when the customer demands
(OEMs in this case) are high. It will bring company’s value down to earth.
Once the parts are manufactured Hawks Engineering Works has to provide them to their customers, the OEMs at the required
time. Hence the production needs to be completed well before time and is to be distributed to the OEM. For this the company
employs the services
of various transportation companies
that transport the parts from the manufacturer
to the assemblers.
So in this supply chain perspective, these transporting companies
are playing the role of distributors.
The customers
i.e. the OEMs are to be satisfied
at any cost to bring the value of Hawks Engineering Works up. For this Hawks Engineering Works ensures that the parts are made defect free through proper
quality check, that the material
used is of good quality
and that the product reaches
the customer at the right time and at the right place.
Hence it is seen that to keep the value of Hawks Engineering
Works increasing, the company has to keep two things
in mind. One is that the cost of their product is minimum and the second
is that the customer is always happy and satisfied.
Cost is reduced
by increasing the efficiency of the production
process and customer
satisfaction is achieved
through proper responsiveness towards
the customer needs and demands.
If the company
is able of achieve both these goals of low cost and customer satisfaction,
the value of the company
will increase dramatically.
So we see that how different
perspectives to the same supply
chain can bring drastic changes
to the way we see the issues
of supply chain.
We also see that communication
and coordination between
different parts of the chain are crucial
for the proper
working of the entire chain,
the value addition
to the company
and the satisfaction
of the final customer i.e. the people.
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