The framework provided by supply chain drivers is useful when analyzing supply chain capabilities. The balance of responsiveness and efficiency that a supply chain can accomplish will depend on decisions made about how each driver conducts.
Your choices on the five supply chain drivers will influence the supply chain capabilities. Depending on the shifting needs of the business, each of these drivers can be built and managed to prioritize responsiveness or efficiency. You learn about the expectations a supply chain must meet and the skills it needs to succeed as you study how it operates. If necessary, change the supply chain drivers to achieve such capabilities.
Increased supply chain profits are achieved through the application of logistical drivers. Logistical drivers are quite significant. Cross-functional drivers, on the other hand, are becoming more and more significant in boosting supply chain surplus. However, the drivers never behave on their own. To assess the performance of the supply chain, they interact with one another.
The Supply Chain drivers can be classified into 2 broad categories
a.) Logistical Drivers
b.) Cross Functional Drivers
The physical place where the purchased product is kept in the first physical facility in the supply chain network. This location can be either the first (production site) or second (storage location) type.
The performance of the supply chain is thought to be significantly influenced by decisions regarding location, as well as that location’s capacity and capabilities, which can have both positive and negative effects.
For instance, fast-food franchises use location to open a large number of stores in high-volume regions to be particularly responsive to their customers. Operating from a small number of locations and centralizing tasks in busy areas will increase efficiency. As an illustration, consider how e-commerce businesses serve vast geographic markets from a small number of key locations.
A supply chain’s inventory consists of all different kinds of raw materials and finished commodities. Management creates inventory asset reports both internally and externally.
Since changing inventory policies can also significantly affect the effectiveness and accountability of the supply chain, it is seen to be particularly sensitive.
Many retail organizations are working hard on new products, consumer needs, and delivery speed instead of maintaining a high quantity of inventory.
For instance, a clothes retailer can increase its responsiveness by keeping a lot of products on hand and meeting demand from that inventory.
In the supply chain, the transporter moves the inventory from point A to point B. Transport utilizes a variety of routes and modes, each with unique performance requirements, such as full truck, courier, part load, quick mode, etc. The supply chain’s accountability and effectiveness are greatly impacted by the choices made about transportation.
For Example, a Logistics Company that desires the greatest service might transfer a product quickly. Making the product supply chain more responsive is one example, however, it is not regarded as efficient because the fast mode is expensive.
Data on all sorts of facilities, inventory, transportation, costs, prices, and clients throughout the supply chain are analyzed.
The supply chain’s main role and likely biggest performance driver is information. Because all other drivers might be impacted if it didn’t function properly directly.
Information gives management the chance to improve any company’s sensitivity and efficiency in addition to the supply chain.
For example, many businesses now have access to greater information that allows them to balance supply and demand as well as production and distribution.
Without effective sourcing, any organization won’t carry out any specific supply chain management tasks like production, storage, or shipping.
Strategic level sourcing decisions affect the supply chain’s accountability and efficiency by determining what a company does, what it wants to do, and what its sources do.
The business should work to keep its facilities efficient while making its manufacturing facilities extremely sensitive in high-cost locales. You should be aware that the cost of goods sold accounts for sourcing costs. Additionally, the funds paid to vendors are listed under accounts payable.
Sourcing is the entire set of business processes required to purchase goods and services.
Pricing as a driver identifies the price that a company should or will charge for the products and services it offers along the supply chain. Pricing has an impact on consumer behavior, which has an impact on demand and supply chain efficiency.
For example, if a transportation company charges differently depending on the lead time supplied by clients, price-sensitive consumers will likely place orders fast and customers who are patient will be prepared to order just before.
Customers who value accountability are provided with it through pricing, while customers who do not value accountability as highly can benefit from cheaper expenses.
To determine the performance of the supply chain, factors such as facility inventory, transportation, sourcing information, and pricing interact. Depending on your company and financial objectives, companies can design and manage these drivers to highlight the optimal balance between responsiveness and efficiency. Therefore, to maintain this balance, a company must assess the performance of the supply chain’s drivers because doing so will also enable it to determine how and when it has achieved the strategic fit.