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Supply chain management presupposes all the activities undertaken in obtaining raw materials from suppliers to delivering the processed goods and services to the clients (Alavi, Faryabi, & Sadeghi, 2014). The type of industry determines the nature of the supply chain. For instance, the supply chain of the businesses operating in the manufacturing sector is different from the companies working in the service industry (Saudi Electronic University, 2016, p. 2). This paper will evaluate various considerations in creating an efficient supply chain for Savola group in the Middle East and state the challenges that the business may face in regards to complexity.
Acquisition of Raw Materials
The firm should ensure that the raw materials obtained for production are of high quality because they will determine the quality of the processed goods (Saudi Electronic University, 2016, p. 2). Since the company is involved with agricultural produce that has a short market life, the procedures for storage should be efficient (Golgeci & Ponomarov, 2013). The organization can form a partnership with the farmers that produce the crops used in the production of oil. These farmers will be supplied with the storage facilities at their farms to store the crops when they mature. Therefore, the organization will acquire optimum raw materials to be used in the production process (Handfield, Cousins, Lawson, & Petersen, 2014). The firm can also install storage facilities on trucks that will be used to transport the products from the suppliers to the production facility.
Inventory control is a component of supply chain management that is focused on minimizing the expense of stocks while maximizing the capacity to offer a product or a service to the clients in a convenient manner (Alavi et al., 2014). Regulating inventory improves supply chain management since it helps maintain the raw materials and processed goods at quantities that are neither too low nor too high. Low inventory would result in the lost sales or expensive production intervals, whereas high stock would limit space and capital (Edkins, 2009). Inventory control regulates stock at every level of the manufacturing process comprising of purchase and delivery or exhausting and re-ordering the stock. A tie-up of funds results in the excessive borrowing, extreme interest expenses, and hindering the procurement of important items. The organization can use this concept to identify the amount of stock it has at any particular time and trace the stock. In business, inventory control relates to all the components used to create a product, from the acquisition of raw materials to the processed goods (Golgeci & Ponomarov, 2013).
Inventory issues need prompt corrective actions. In various firms, the market life of stock is relatively short. For instance, Savola group deals with agricultural produce. Hence, if the stock is inadequate when the market is high, a substantial amount of income is lost (Handfield et al., 2014). If inventory is excess when the market is low, the excess must be cleared, frequently at the sharply decreased prices, which reduces the revenue obtained. Thus, the inventory control will help the business by ensuring that the products are sold at their optimal price.
Inventory overstock or shortage is primarily caused by the inadequate information on the modern market tendencies (Lynch, 2011). Capturing customer needs is significant in ensuring that a company yields optimum inventory that will sustain demand and will not result in a surplus (Sarmah, 2012). Thus, an important area that Savola group can enhance in supply chain management is the collection of data from the customers. This process helps the group to determine the amount of inventory that will lower the operating costs and increase the income obtained from sales (Morana, 2013). Savola group can use the methods below to augment the management of information regarding the products and market trends.
The firm can invest in a steadfast database, which is an essential investment. One prominent place is designed to gather all the info about the customers. Sarmah (2012) states that the more information the group has about the clients, the more it will assist the organization in tailoring its products to suit distinct requirements. The group can classify the customers based on various standards that include how much they purchase and what preferences they have (Edkins, 2009). The expense of these purchases is also incorporated in the database.
The firm can inquire the staff for the customer insight. This move could be achieved via various systems provided by the management. Consumers interact with the employees more frequently than the management does. The clients make many inquiries when they buy products from the company. Moreover, they offer feedback and comments regarding the products and what they expect from the products. The group should receive this information from the employees so that they could enhance the quality of the existing products and the innovative products that they want to launch in the market, which will improve the supply chain by moving products fast (Lynch, 2011). Savola group can set up a platform where the employees discuss client issues.
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In addition, the organization can use social media to acquire information about their products and present market trends. Using social media is effective because clients visit social sites and they regularly share their experiences with the products of businesses and recommend businesses to each other. The social sites provide a fast and efficient platform for the customers of organizations to relay their experience to their friends (Morana, 2013). This information will help the business to restructure the supply chain.
The group should employ various methods to help in regulating the inventory because of the benefits ensuing from using the approach. The benefits include increased sales, improved efficiency, and decreased operating costs (Sarmah, 2012). An appropriate level of inventory is maintained by having sufficient information on demand of the various products manufactured by the group.
Managing the Complexity in the Supply Chain
IT has provided suitable methods that can be engaged by the business to manage risks in the supply chain (Edkins, 2009). For instance, cloud computing can be used to collect a vast amount of data. Cloud computing is a systematic plan that will permit the group to capture data in different file formats. This system reduces the operating expenses of the supply chain. The money saved by this procedure is invested back to the business. Therefore, “the operations manager should liaise with the team to implement novel technology that will make the supply chain efficient” (Saudi Electronic University, 2016, p. 2).
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Cloud computing permits the firm to gather data on different aspects that affect the quality of finished goods (Lynch, 2011). An efficient scheme like cloud computing gathers all the data and it has tools that can be used to help in the inventory control. It is now possible for the business to track the most often searched term by its clients when they access the organization website. This information can be obtained by the firm to be used for the analysis purposes. The information can assist Savola group to produce products that have high demand. Thus, the group will not be at risk of surplus or shortage inventory (Alavi et al., 2014).
Moreover, the risk involved in the supply chain will be regulated by an efficient inventory control software. Consequently, the firm has two main options. First, it can decide to build an inventory management from scratch. Secondly, the group can purchase an enterprise resource planning software that has the inventory control as a component. The latter option is practical since experts create the software; hence, it addresses all the inventory issues precisely. The use of technology helps reduce the complexities facing the business.
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These considerations will smoothen the supply chain in the organization. Excess inventory that results in a tie-up of capital and shortage of inventory that does not meet demand will not be witnessed. The overall efficiency of the supply chain will be enhanced and the company will reap the benefits of an effective supply chain that encompass increased sales and lowered production costs.