Strategic Decision Variables In Supply Chain Management

Strategic Decision Variables In supply chain management | Inventory | Location | transportation | Facilities | Production

You Should Remember

Supply chain decision drivers represent the crucial parts of decision making in SCM, in which they in due course produce the outcomes that impact supply chain performance.

A Comprehensive Understanding of Supply Chain Practices

• A supply chain is fundamentally defined as a set of three or more firms directly connected by one or more of the upstream and downstream flows of products, services, and Resources from a basis to a consumer.
• A very basic supply chain comprises of a business, supplier, and customer directly associated by one or more of the upstream and downstream flows of products, services, and Resources.
•  A comprehensive supply chain comprises of raw material providers of the immediate supplier and customers of the immediate customer, all connected by one or more of the upstream and downstream flows of products, services, and resources.
• An ultimate supply chain consists of all the businesses involved all the upstream and downstream flows of products, services, and resources from the first supplier to the ultimate customer.
• Supply chain management practice is a systemic as well as strategic direction of the business functions.
• An effective supply chain practice always focuses on improving the long-term performance of the business.

Supply Chain Management | Comprehensive Understanding  | Driven Factors Behind SCM Popularity

Strategic Decision Variables In                          Supply Chain Management                                                                        

Supply chain decision drivers represent the crucial parts of decision making in SCM, in which they in due course produce the outcomes that impact supply chain performance.

accounting & finance

Entrepreneurship

Human Resources

Leadership

marketing

Strategy

Therefore, they appear as the decision or design variables in the optimization models practiced in SCM decision making.

The key decision variables that contribute to the large extent in managing supply chain are described in the following section.

Inventory and Location:

Corporations maintain inventory of raw materials, and finished goods to defend against impulsive demand and undependable supply. Inventory is considered as one of the key areas of supply chain costs.

Managing enormous inventories may increase supply chain costs but offer an advanced level of customer service.

The core decision variables here are:

1. What products or goods to hold in inventory,
2. How much to order,
3. When to order; and
4. Where to hold inventory (locations).

Transportation:

Transportation in the nature of business is associated with the movement of items among the supply chain phases- suppliers, plants, retailers.

Using faster transportation methods such as air and roadways may involve higher costs on the other hand these methods will help in reducing delivery times in addition increasing reliability.

The strategic decision variables at this stage are:

1. Whether to outsource transportation implementation to third party logistics source.
2. What transportation methods are needed to practice ( road, air, sea etc.) for what items or goods ( raw supplies or materials, and finished goods)
3. Distribution choices for finished goods (delivering products to customers directly or through distribution networks)

Facilities:

Facilities such as plants and distribution points carry out a key role in handling supply chains. The facilities are commonly regarded as strategic decisions and truly potential to directly impact the performance of the supply chain.

The key decision variables underneath facilities are:

1. Quantity of plants and the localities of plants
2. Sizes or volumes of the plants and budget assigned to those plants
3. Amount of distribution centres and the locations of distribution centres
4. Distribution or supply approaches

Production:

What sorts of products or material are required to produce and which facilities are demanded to control the bigger costs are considered to be the key influencing factors. Clearly, longer cycle times can result larger costs (e.g., labour costs, inventory costs etc.)

The strategic decision variable at this stage is:

1. What sorts of products to be produced under which facilities.

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Significance, Motives and Processes Of Operations Management | Inputs | Outputs

Supply Chain Management | Comprehensive Understanding  | Driven Factors Behind SCM Popularity