Sample Essay On Problems In Supply Chain Management

Type of paper: Essay

Topic: Supply, Supply Chain, Logistics, Business, Management, Information, Demand, Production

Pages: 6

Words: 1650

Published: 2021/02/24

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In the context of increasing globalization, tougher competitive environment and a market economy it is clearly seen a tendency to strengthen the strategic role of logistics in industrial activities. In such circumstances, companies are increasingly coming to the conclusion that it is necessary to control not only their own business, but also supply chains The purpose of supply chain management is to minimize the total logistics costs while satisfying a given fixed demand. These costs may include the cost of raw materials and other acquisitions of companies, internal and external transport costs, investment in equipment, production costs, the costs of distribution centers, costs of holding inventory and other costs. When constructing a model for the solution of specific problems of planning it is possible to study only a part of the company's supply chain and associated costs (Cooper, M.C., 1997).
In this paper we will consider the concept of supply chain management, consider the problems which may occur in the process of building a supply chain and show possible ways to resolve these problems


Effective organization and supply chain management has a decisive impact on the rates and proportions of economic development of the economy of the country. Realizing the function of distribution and exchange, formed supply chain is determine the dynamics of inventory, information, financial and other flows in the reproduction process. The concept of supply chain is relatively new and is one of the manifestations of the extended use of logistics. Participants supply chains are increasingly aware of the need not only internal integration of flow processes, but also networking and coordination between other business units of the chain: suppliers, customers and the enterprise itself. In supply chain management the problem of market sales network association is arise. The purpose is to associate a market, a production process and procurement activities so as to provide customer service to a higher level and at a lower cost. Logistics contributes to the problem of optimizing the material flow along the supply chain as a whole. Integrated logistics tools aimed at maximizing the qualitative and quantitative characteristics of all elements of the supply chain. It focuses on an approach in which the needs of the market transformed into a production plan and strategy, linking it with the strategy and procurement plan (Hugos, M., 2003).
An important condition for the effective functioning of the supply chain is to reduce logistics costs of goods movement. Decisive role in the calculation of the costs of specific activities carried out in the supply chain has input intensities identification elements of the logistics chain and quantitative assessment. Realize this is possible on the basis of the attribute characteristics of activity costs for each type of customer and the market segment of customer service, identifying the factors that ensure variation maintenance costs, taking into account the specific resources used to support buying segments.


Logistics chain includes the company's geographically dispersed facilities where purchased, converted, stored or sold raw, unfinished and finished products, and distribution channels that connect these objects, which moves products. These objects can be controlled by the focal company, suppliers, customers and representatives of third parties or other companies with which the company is a manufacturer of goods does business. The company's goal is the efficient management of its resources taking in consideration their location and moving in supply chain. (Hines, T., 2004).

The general scheme of inter-organization supply chain can be described as follows (Vaidya, K., 2012):

Subjects of supply chains are generally classified by function in the process of movement of goods, thus presenting peculiar clusters of logistics: supply, transportation, manufacturing, warehousing and distribution. At the same time supply chain actors can be distributed to participate in a variety of business processes, covering all logistical steps presented above. Thus, the concept of logistics and supply chain processes of interaction of its subjects with the industrial transformations can be represented as follows (Levi, D., 2000):
Supply chains appear to travel long distances between all participants in the process of value creation. Formation of the supply chain allows for more efficient use of resources with regard to their presence on some areas and the lack of (if required) in other regions. Organizing the movement of resources between geographically remote sites or other industrial sectors, supply chain contribute to the enhancement of international division of labor, improving B2B-communications, expansion of international trade, as well as the elimination of discrepancies between supply and demand (Mentzer, J., 2001).

The main problems that arise in the supply chains management (Zuckerman, A., 2002):

1. Conflict
The conflict in the relationship occurs when the goals of the parties involved are opposite or unclear.. Conflict often arises due to competition in the distribution of profits. It is known that a conflict between individuals or departments may hinder performance. It may also be a role conflict that arises because of differences over the objectives, methods, interpretation of contracts.
2. Safety
Safety problems associated with information leakage, as well as opportunistic behavior of partners. To solve this problem, we recommend the development and strengthening of open and trusting relationship. Trust increases the flow of information and allows making quick decisions. Loss of goods and cargo theft leads to suspension of production facilities, shortage, as well as unnecessary cost when ordering additional shipments.
3. Untimely
Delivery delays have severe consequences. Delay information may affect the reduction in the efficiency of planning, lead to nuisance control and missed an opportunity to correct the situation in time, thereby minimizing losses.
4. Fluctuations in demand
A uniform pricing policy may be used as a lever to help manage demand in the supply chain. Uniform pricing methods are triggered so that increases total return of members of the supply chain and reduce the severity of the problems arising as a result of fluctuations in demand. Pricing in the supply chain is used as a mechanism for redressing the imbalance between supply and demand. Even when the production can respond to sudden variations in demand, this can lead to side effects such as an increase in product defects. Fluctuations in demand can be reduced due to the exchange of information in the supply chain, which will reduce the cost of storing reserves.
5. Inaccurate
Inaccuracies can occur when predicting, for manual data entry, which can lead to an incorrect price, order number, etc. Logistics information must accurately reflect and current values ​​and the dynamics of functional parameters. Higher accuracy of information reduces uncertainty and the need to carry out additional steps. Low quality, repeatability of information between partners can be solved by data synchronization.
6. Lack of resources
Goods shortage occurs when the demand exceeds the available supply for the product or service. This may be the result of measurement of the number of variables is too small, or because of poor communication between organizations or departments. Great importance here is the return flow of information. Lack of skills and knowledge and low-skilled staff are leading to excessive labor costs and low productivity.
7. Resources planning
The current status of some enterprises, namely the poor quality of the production process, the inefficient use of funds, the growth of accounts payable and receivable, and inventories increased costs for their service, exceeding standards for working capital results in a loss of stability of the enterprises, thereby identifying the need for the development of innovative processes in the functioning of domestic enterprises. Significant amounts of resources consumed, wide range, branching and length of communications determine the need to improve management procurement, storage and distribution of mineral resources, process control and quality goods movement planning of supply and transportation for them and the necessary financial resources.
8. Pricing
Logistics solutions with respect to the factor of price are usually have a direct impact on the achievement by the corporate (including financial) strategic objectives defined by marketing based on the conditions dictated by the competitive environment. The complexity of supply chains (at micro logistics level) and supply chains in general (at the level of macro logistics) is caused not only by the composition of diverse divisions of organizations (firms), becoming parties to these chains and their numerous connections, but also the object of the pricing in logistics chains. Such an object is logistics services. Depending on the market structure to which belongs producer organizations services, changing approach to pricing and to determine the optimal output of goods and services with the resources available. In the process of pricing takes into account the effect of various factors: the current demand (price elasticity of demand, the psychological perception of the price), and the full marginal cost of production, the prices of substitutes and potential competitors, structure and number of participants in the channel merchandising, influencing the final consumer prices, legal restrictions prices, product characteristics, etc.

All the above-mentioned problems of supply chains can be used to diagnose problems and make decisions.

Objective need in logistical organization of resource support can be explained by the following reasons. Firstly, an integrated logistics tools, synthesizing methodology of general systems theory, systems engineering, cybernetics, marketing, management, and other scientific disciplines, allows to solve the problem of organizing the movement of material flows from their places of origin to the place of use (use). Secondly, logistics creates conditions for the removal of contradictions between the various sectors and activities in the field of road infrastructure, because it suggests pairing the economic interests of all participants in supply chains and systems. Thirdly, the logistics has a powerful resource-potential for a systematic approach to not only material but also other economic flows during construction, reconstruction, repair and maintenance of highways (Szidarovszky, F., 2002).
For effective planning and coordination of production processes need accurate forecasts that allow advance allocate resources, rather than in response to the change has already begun to implement costly changes in capacity utilization or the use of reserves. Forecasting increases the efficiency of logistics, because it creates an opportunity for the exchange of information, rather than stocks.


Cooper, M.C. Supply Chain Management More than a New Name for Logistics. 1997.
Hines, Tony. Supply Chain Strategies Customer Driven and Customer Focused. Oxford: Butterworth-Heinemann, 2004.
Hugos, Michael H. Essentials of Supply Chain Management. Hoboken, N.J.: John Wiley & Sons, 2003.
Levi, David, and Philip Kaminsky. Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies. Boston: Irwin/McGraw-Hill, 2000.
Mentzer, John T. Supply Chain Management. Thousand Oaks, Calif.: Sage Publications, 2001.
Oliver, R. Keith, and Michael D. Webber. Supply-chain Management: Logistics Catches up with Strategy. London: Chapman Hall.
Szidarovszky, Ferenc, and Sa R. Introduction to Matrix Theory: With Applications to Business and Economics. River Edge, N.J.: World Scientific, 2002.
Vaidya, Kishor. Inter-organizational Information Systems and Business Management: Theories for Researchers. Hershey, PA: Business Science Reference, 2012.
Waller, Derek L. Operations Management: A Supply Chain Approach. London: International Thomson Business Press, 1999.
Zuckerman, Amy. Supply Chain Management. Oxford, U.K.: Capstone Pub., 2002.

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