Elemental Description of Supply Chain


A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to new product development, marketing, operations, distribution, finance, and customer service.

A supply chain is dynamic and involves the constant flow of information, product, and funds between different stages. The customer is an integral part of the supply chain. The primary purpose for the existence of any supply chain is to satisfy customer needs, in the process generating profits for itself. Supply chain activities begin with a customer order and even when a satisfied customer has paid for his or her purchase.

The term supply chain conjures up images of product or supply moving from suppliers to manufacturers to distributors to retailers to customers along a chain. It is important to visualize information, funds, and product flows along both directions of this chain.

The term supply chain may also imply that only one player is involved at each stage. In reality, a manufacturer may receive material from several suppliers and then supply several distributors. Thus, most supply chains are actually networks. It may be more accurate to use the term supply network or supply web to describe the structure of most supply chains.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Advertisements

Financial Analysis: Real Problems


The term financial analysis  when applied to new products conjures up visions of sales forecasts and profit calculations. By using traditional financial analysis, we can get a good read on the current proposal.

 Actually, sales forecasts and financial analysis systems are no problem as such. We have an immense warhead of forecasting methodologies, most based on many years of experience. We know, for example, what makes for sales. This model does an excellent job and serves as the basis for some very advanced mathematical systems used by some of the most sophisticated new product marketers in the world. And every firm has people who can make an income-statement-based net present value calculation (using discounted cash flow methods). We have had years of experience with it.

 The financial model requires product cost, prices, the current value of money, probable taxes on the future income, the amount of further capital investments that will be required between now and when we close the books on the product and much more.

 They will never be certain, even after living out the product’s life cycle. Sales will be known, but we might have had a better marketing strategy. Costs are always just estimates. We will never know the true extent to which a new item cannibalized sales from another product. If we had not marketed the new item a competitor probably would have. And on and on.

 The fact is, we rely on estimated. Management’s task is ot to make the estimates as we can and then manage around the areas of uncertainty in a way that we do’t get hurt too badly.

 On minor product improvements we do this pretty well. On near line extensions, we also do well, but with more misses. Totally new products, using technologies never so applied before, are pure guessing games.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight