HL MARKETING THEORY SUPPLY CHAIN MANAGEMENT (LOGISTICS) IB BUSINESS & MANAGEMENT – A COURSE COMPANION, OXFORD 2009, p220

SUPPLY CHAIN MANAGEMENT Businesses will want to try to maximize the efficiency of their supply chains in order to reduce the cost and time that it takes to get products from raw materials stage to final point of sale to the consumer. Techniques such as Just in Time (JIT) production can reduce the amount of stock a business needs to hold and therefore reduce warehousing costs.

SUPPLY CHAIN MANAGEMENT Better integration of its IT systems with those of its suppliers can allow a business to reorder quickly and efficiently to reduce the risks of stock outs. Locating production facilities close to suppliers or end markets can massively reduce transportation costs. There has been a large growth in the number of specialist logistic businesses in recent years, who make money by trying to streamline their clients supply chains.

SUPPLY CHAIN MANAGEMENT Specialist Software Many businesses now use specialist software to improve the efficiency of their supply chains This allows for real time monitoring of stock levels (both raw materials and finished goods) which can mean that the business is always able to keep production running at an optimum level, without ever running out of suppliers or having bottlenecks develop: eg having no space for further production as finished goods are not being shipped fast enough.

SUPPLY CHAIN MANAGEMENT Bar Coding One system to improve efficiency is barcoding. As you know, barcoding is commonly used in large retail outlets to reorder products. When you buy a loaf of bread at the supermarket and it is scanned at the checkout, this automatically registers that the stock of bread is down by one. Once the stock reaches a pre-determined level, a computer automatically s the supplier to order replacement loaves.

SUPPLY CHAIN MANAGEMENT Bar Coding Manual input is kept to a minimum and the system can replace almost by itself as long as it has been set up correctly. In practice business, will use a combination of software based solutions and human oversight to manage the chain as effectively as possible without losing the human values of common sense and problem solving.

SUPPLY CHAIN MANAGEMENT Customer Relationships Managing the supply chain effectively can also have positive effects on consumer relationships. Businesses that can efficiently ensure that production is led by consumer demand are far less likely suffer from stock selling out. If a product is not available, consumers will usually have to buy a substitute product from a rival company. This is a lost sale, but may also lead to future losses if consumers continue to buy the alternative product rather than the original choice.

SUPPLY CHAIN MANAGEMENT Cost Savings Given the focus of many businesses on profit maximization through getting pricing right and sourcing cheap raw materials and components, supply chain management is one of the few areas remaining that present opportunities for large cost savings. As a result it likely to continue to grow in significance in the coming years.