It is a well-established fact that the economy is the decisive factor in supply chain management. The economic conditions are a driving force behind business and impact everyone in the supply chain which includes the customers, suppliers and the supply chain managers. Especially in today’s tough business scenario, distributors and retailers should ensure that the demand and supply are balanced and matched. That is not just a matter of going ahead of competitors, but also about the survival of the business.
To enable decision making, companies are using the latest technology to gather and analyze the information using big data and other such methods. Using this information, the supply chain managers can find the latest trends and signs that can potentially impact the business in a positive way. This enables them to take the right decisions at the right time so that they can make the business get maximum profits.
Move from Cost Orientation to Service Orientation: Managing the inventory is essential for not just achieving success in the market but also to achieve the financial goals. Traditionally, companies have relied on strategies which are based on cost. But a survey reports that improvement in service level is the focus right now rather than cost due to the changing dynamics of the current market. Companies are looking to be flexible in inventory and production so that they can use the given opportunities. Though the companies are moving to service orientation, there is also a cost reduction due to better efficiency of the inventory. The supply chain is faced with many challenges to become demand driven than cost driven, but the cost is not ignored.
Cost Decisions by Suppliers: The supply chain is driven by two areas called the micro and macroeconomics. Macroeconomics is what determines the economy and includes the GDP, interest rates, inflation, unemployment, and fiscal policy. One of the examples of macroeconomics is the bank interest rates. On the other hand, microeconomics includes labor rates, trade-off companies, supply and demand, and analysis of cost price. The focal point of microeconomics is on the market, consumers, and companies. An example of microeconomics is integrating demand and supply with company sales.
Supply-Demand Management: Scarcity is defined by various ways by academicians, some think of it as the price someone pays for a service or a product while others call it learning about production and utilization. But irrespective of the definition given by economists, for a supply chain manager it is about bargain between a buyer and a seller which is mostly dependant on the supply and demand.
Challenges in Supply-Demand: Supply chain managers are at a great pressure to manage the inventory which is driven by demand, but they still need to keep the cost in perspective. The other challenge is to improve the innovation so that it can be appealing to all layers of the market. A new strategy needs to be implemented for distribution and fulfilment as there is a greater regulation in place along with greater competition. It is also pushing the companies towards outsourcing due to price, longer lead times and globalization. This is the reason why new processes and new management approaches should be implemented.
All these and many more nuances make the task of supply chain a challenging task.