What is Supply channel
The supply channel is defined as the total process by which a product reaches the end consumer as goods and services. It consists of a sequence of events which involves strategic decisions over different resources. Relationships are focused on delivering optimum value to the end consumer.
The traditional supply channel involves sources of raw materials, the manufacturer or producer, wholesaler and retailer.
The supply chain is an arrangement between paired links with an emphasis on controlling and managing the relationships in order to move products through the process effectively.
Objectives of the supply chain
The supply chain should achieve
1. Reduced inventory and storage investment in the chain
2. Improved end-user and customer service benefits through productivity and effectiveness (faster order cycle time, improved on-time shipment, lack of damage or defects, etc.)
3. Development of strong relational links, thereby a strong chain in order to build competitive advantages.
4. Lower procurement, transportation and unit costs which will aid competitive pricing to increase value added benefits.
Problems in supply chain
1. Channel relationships are strained: The whole chain is dependent upon the interaction between any two parts of the chain. The working relationships should be good and provide the service and economies required. But in practice the relationships are often strained. They contain rivalry, mistrust and shrouded in secrecy.
2. Lack of coordination among channel members: The present market witnesses the increased use of multiple channels of distribution. They are competitive and lead to the deterioration in coordination and cooperation between channel members.
3. Disproportionate value from supply chains: The channel partners are not conducive to retailers. So, they are not able to derive increased added value from the supply chain.
4. Channel persons are not committed to improvement: Parties to the channel should be committed to invest in enhancing the channel efficiency. They should also work for mutual advantage. When channel partners are self centered, the value of the supply chain decreases.
5. Channels become unviable: Channels become uneconomic owing to unhealthy support of existing traditional practices disregard of the importance of information, lack of entrepreneurial ideas regarding innovation, renewal and
development, and organizational culture of inflexibility.
The channel of retail distribution involves manufacturer, intermediaries and the retailer. The channel members provide a chain of facilitating services in order to sell the right product to the final customer. Consumers prefer to buy from retailers. They know that they pay a little more for the products when they buy from retailers. Yet, they give importance to convenience of buying through a retailer.
Channel forms and processes are emerging which are characterized by the expectation of lower margins and more value for the customer. The channel success will depend upon the degree to which the supply chain is improved. The efficient functions performed by the manufacturer and intermediaries contribute to the constant improvement in the supply chain.
Manufacturer’s functions in Supply Chain
The supply channel starts with the manufacturer. The manufacturer or supplier processes raw materials into finished, consumable goods. The manufacturer should carefully take into consideration the following facts for enhancing the efficiency of the chain.
1. The manufacturer should not indulge in over production.
2. He should not make the market wait because of lack of production.
3. He should ensure that the channel flows remain efficient in the areas of transport and logistics.
4. The manufacturer should be aware of the implications of time and cost factors involved in the process.
5. Suppliers may specialize in the type of products they process or diversify into a wide product range.
6. Suppliers of leading brands will unleash high-pitch marketing activities, including appointment of sales representatives and running several advertising campaigns. These will ensure that their products are given maximum public exposure.
7. Finally, suppliers can reduce the cost of their products, so that retailers can display prominently the products locations in their stores.