Larger businesses and governmental organisations rely on supply chain management strategy planning and operation management to increase their efficiency. Raw materials and personnel hours can go to waste whenever a surplus is created or when an insufficient supply of products is placed on a store shelf. For a store front, supply chain modelling depends on replacing purchased goods quickly enough to avoid loss of potential profits. For a factory or other production line, shortage means lost time.
A surplus also has the potential to waste money. Manpower is spent on handling materials, and the surplus occupies storage space that could be reserved for other materials. A surplus demands larger floor space and could extend to renting storage. Supply chain management in a factory is meant to minimize these drags on cost.
Large businesses must manage many resources, ranging from the shipping of products to stores to large numbers of employees. The upper management level must negotiate with providers, plan deliveries, and hire vendors with cost efficiency at heart. A chain store might receive multiple truck deliveries in a single night, so scheduling deliveries effectively is one example of strategic supply chain planning.
Proper management of a complex network of resources depends on records kept in a computer system. Personnel oversee this data, and some workers specialize in supply chain planning. While the manager of an independent store handles orders and employees personally, corporations can have entire departments dedicated to managing supply. Third party companies provide supply chain management as a service, and software developers sell programs that promise to improve efficiency.
Since properly directing the flow of materials can require much management and clerical work, supply chain software attempts to automate what is traditionally a human task. Systems exist that scan supply as it is being depleted, and this count directs the rate of replacement. If products are stored at a central warehouse, then stock can be delivered in nearly exact quantities. Human counting of inventory is still performed, but total work hours can be greatly reduced with this technology.
It is more difficult to control the flow of materials and workers when depending on a third party. Access to another company’s records and computer systems is typically not available, so another field of supply chain management strategy planning and operation is proper coordination with a contractor. One example is the design of new planes for the Air Force, where a private manufacturer works with a governmental body to create a product. The airplane company is governed by regulations, and approval comes from military officials. The Air Force foots the final bill for project overruns, but careful cooperation can save millions of dollars.
Advanced supply chain planning deals with unpredictable variables, such as the performance of third parties. Management ranges from carefully choosing vendors to penalizing them for wasting time. Thorough communication can reduce oversight, and negotiations are sometimes necessary to persuade a provider to keep a tight schedule. Some large retailers have gone the length of suggesting to manufacturers ways in which they can reduce production costs.