Supply chain management-The competative advantage

Supply chain management is my bread and butter these days as it pays me at the end of a month. This post is about my new love Supply chain management.

Value Chain

The value chain consists of the set of activities enabling the firm to deliver the finished product in the hands of final consumer, it’s an integral part of firms daily operations as there's no point in spending huge dollars on your communiqué unless your products are present at the convenience of the consumer. Hence it becomes necessary for firms to work on their distribution systems and get things right. There are various parties which help the firm to pass on the goods to the end consumer and for this endeavour, they charge a fee which adds on the cost of the product also called as distribution costs and the parties involved in the supply chain members are considered as stake holder as they enable a firm to gain a competitive advantage. The firm can benefit from the supply chain both in procurement and also in distribution of the production. In this post I shall discuss of the companies which have gained competitive advantage from their procurement as well as their distribution.

Back ward integration: Amul

Amul, the brain child of Verghese Kurien,is one of the biggest producers of milk and related products in India with product line extending from milk to ice-creams. This success of amul can be attributed to the value chain of Amul. It procures the raw milk from about 2.8 million milk farmers everyday who are registered with Amul Its the largest milk company in India both by volumes and revenues no other firm is now where near as no one else is able to source milk at the same prices which amul gets. Its able to do this as it’s a co-operative owned by these farmers hence procurement becomes easy and a sustainable advantage. Even Itc was able to replicate the success as amul through its ITC e-choupal procuring and helping the farmers to use the best practices in their operations.

Forward integration: Dell

When it comes to forward integration there’s one company which has done incredibly well in managing its value chain and selling its computers directly to the end consumers by reducing the distribution costs it passed on these savings to the end consumers . That’s Dell. Started by Michael dell during his graduation days with a simple idea of building customised PC and taking orders directly from the customer them went on to become a great success story. And computer was an industry which is more of a commodity as the inside product or the chips is more or less similar among all the players. Dell understood this well and differentiated by delivering directly to the consumer.

The firms supply chain can also be the source of competative advantage and thats the reason why businesses all over the world are integrating their systems with their vendors and distributors and no longer call them as vendors, they are a part of the value chain and are called as partners.I think this is the right strategy as business is nothing but delivering maximum value to the customers and to generate this value firms should strive to partner with the various stake holders for delivering this value