Supply Chain Management Is The Process Of Planning, Executing, And Controlling Operations Related To The Supply Chain In The Most Optimal Way Possible.

Supply chain management includes all movements and storage of raw materials, work-in-process inventory, and finished products from the initial starting point to the final point of consumption.

What is production?

Before defining the supply chain and supply chain management, First, we must explain the word production. Production is the creation of a work, sound, or service. Production is the process of combining different inputs from materials and non-materials (maps, manufacturing knowledge, etc.) with each other to make something for consumption (output).

A part of economics that focuses on production is known as production theory, similar to consumption theory in economics. To produce different amounts of product in different proportions, we assume that there is a variable factor.

We consider the short-term period where all factors except one are assumed constant. The shape of this function is drawn as below, in which the total production is displayed with the Total Product, the average output with the Average Product, and the final shown with Marginal Product.

Total production is the top product that can be obtained from any number of workers, the average production of labor is the division of total production by the number of workers, and the final product is the additional product attributed to a slight increase in the amount of the variable factor employed with a fixed factory.

The final product is often obtained by changing the variable to the value of one unit.

The final product first increases and then decreases, and finally, when the worker is added, it reduces the total output and makes its value negative.

The final cost is the cost of each additional production unit in production activities. These costs, like average costs, are obtained based on the total cost, that is, the difference between the total cost in the previous production and the total cost in the next show. In these costs, only variable costs are involved; For example, producing or not producing an additional unit of the product does not change fixed costs.

That is, an increase in production by one unit will not lead to a rise in fixed costs, But to produce an additional unit of goods, we must have different raw materials, which causes the variable price to rise. The marginal cost curve will first have a downward trend and then an upward one.

What is a supply chain?

The supply chain refers to a network of processes in such a way that the ultimate goal is to provide goods and services to customers and includes suppliers, manufacturers, distributors, wholesalers, and retailers who cooperate in a coordinated and coherent manner to satisfy customers. The term we hear a lot in this field is supply chain management.

Chain management includes structured activities inside and outside the company that organizes and directs all business processes in the supply chain in a codified manner and with a color vision. Its goal is to optimize those processes with minimum costs and maximum efficiency.

Supply chain management is an integrated approach to planning and controlling materials and information that flows from suppliers to customers through various organizational functions.

Supply chain management combines inventory management with a focus on operations management with communication analysis in industrial organizations.

This field has become very important in recent years. The task of supply chain management is to manage and coordinate various flows within it. One of the critical management challenges in this field is coordinating the flow of materials between several organizations and within each organization.

Using technologies and tools to track materials from origin to destination and record information at each stage is necessary.

Retail stores

Retail refers to a trade unit that sells goods and physical goods for direct consumption by the buyer and is organized from a specific location, such as a store, boutique, kiosk, or shopping center, in the form of small or individual sections. Retail can include ancillary services such as delivery. Buyers can be different people.

In commerce, a retailer buys goods or products in large quantities from manufacturers (directly or through a wholesaler), then sells smaller amounts to the end customer.

Retail establishments are often called shops or stores. Retailers are at the bottom of the supply chain. Productive marketers view the retail process as a necessary part of the overall distribution strategy. The term “retailer” also applies to situations where a service provider serves the needs of a large number of people, such as utilities such as electricity.

Distribution in the supply chain

Product or service distribution or location is one of the four pillars of marketing. Distribution is delivering goods or services to customers for use or consumption. Distribution can be done directly or indirectly through intermediaries.

A distribution channel is divided into three models: the flow of goods from the producer to the consumer, the flow of money (and money) from the consumer to the producer, and the flow of information in two directions.

Types of distribution methods

The distribution channel can be one of the following four modes depending on which intermediaries are involved:

Producer-consumer: This type of channel is the simplest and shortest type of distribution channel. In the way that the manufacturer sells his product directly to the consumer. Door-to-door sales, sales by mail order, or stores operated now by the manufacturer are all direct sales and fall into this category.

Manufacturer-retailer-consumer:

This type of distribution channel has a new intermediary called the retailer, which can be chain stores. This type of channel is no longer directly involved in sales, and the pressure of this task has been removed. Instead, it can monitor the distribution process from the outside.

Producer-Wholesaler-Retailer-Consumer: This channel is the most common distribution channel in which there are two intermediaries, retailer, and wholesaler, between the consumer and the producer.

This distribution channel is suitable for producers with low financial strength and a limited range of products. (those who do not have these conditions move down one step in the supply chain with vertical integration and assume the role of wholesaler) or need specialized services or wholesaler promotional offers.

Manufacturer-Agent-Wholesaler-Retailer-Consumer: This type of distribution channel is the most extended channel in which three intermediaries are involved, and it is suitable for broader distributions with a variety of products and presence in various markets.

The role of the supply chain in providing services

The supply chain includes all activities related to the flow and transformation of goods from the raw material (extraction) stage to delivery to the final consumer and information flows.

In general, the supply chain is a chain that includes all activities related to the flow of goods and the transformation of materials, from the stage of raw material preparation to the location of delivery of the final product to the consumer. There are two other flows about the flow of goods: the flow of information and financial resources and credits.

Today, various fields are used for the supply chain, including these fields: sustainable supply chain management, reverse or backward supply chain, supply chain simulation, supply chain risk management, interception in the supply chain., supply chain reengineering, advanced supply chain planning, supply chain project management, distribution management and supply networks, fleet management, human resource management, information management, supply chain information system, RFID, etc.

Pricing

Providing better products than other competitors and using the correct steps in choosing a strategy to achieve a favorable position in front of competitors are essential principles to achieve profitability in the business model; Therefore, a company must be able to price its products in such a way that it can obtain revenues commensurate with the value provided to the customer and thus maintain its position about customers, complementary goods, competitors and potential new entrants. Pricing is an essential part of the model. It is a business, and its decisions significantly impact the company’s profitability. The process of applying prices to buy and sell orders, either manually or automatically, is called pricing.

Successful pricing is determined by answering some critical questions:

• How should a price be set that can be related to the benefits the company offers customers and the cost of these benefits?
• When should the company lower or raise its prices?
• How will competitors and customers react when the company raises or lowers its prices?
• When should a company oversell its products?

A company often has to decide whether it wants to reduce or increase its price, whether the price of its new products is high or low, whether the price is permanently fixed or variable, whether to use fixed pricing plans or auctions, etc. Choosing one way or a set of these ways is called pricing strategy. The success of a pricing strategy is a function of the strategy itself, the business model, and especially the fit of the pricing strategy with the business model.

Red Halden, in the book Pricing Strategy, has considered the following principles to be important in pricing:

• The first principle: replace the discount habit with a bit of pride. The best way to break an old habit is to replace it with another. Today, discounting has become common in many organizations. The best way to eliminate this ingrained attitude is to replace it with another perspective. Self-positivity – that is, having a positive and good feeling towards products – provides the necessary confidence to abandon the habit of discounting.

• The second principle is: Know the value offered to your audience. If you don’t know the value you’re delivering to your audience, how do you expect to understand that value?

• You can’t price with confidence until you are confident in the financial value your artwork will provide to your audience. Many managers believe that this information is impossible to obtain, but the reality is that many of your audience can give you this information.

• The third principle: Choose one of the simple pricing strategies. When to set prices high and when to set them low, and what should be done between these two situations? The strategy should be simple and agreed upon by all organization members. Otherwise, you cannot be sure of your prices.

• The fourth principle: play poker better with your audience. Learn to love your audience, but don’t gamble like gamblers. Most art buyers say the value is what they want most, but many bluffs when asking for a discount. Some audiences are motivated by price alone. Others wish to value it and are willing to pay for it. These are the gamblers you need to control.

• The fifth principle: is a price to increase profit. It’s a myth that if you lower prices to increase sales, you can improve your earnings. You benefit when your organization performs multiple activities such as pricing, cost efficiency, and profitability measurement on time and in place.

• Principle 6: Take easy steps to gradually move from cost-based to value-based pricing. Using value pricing requires complex internal systems and skills. The way to achieve it is to progressively improve the pricing as your employees’ skills and abilities grow. Once you’ve mastered the necessary skills, you can quickly move into value-based pricing. As long as cost-based pricing reinforces the financial value you’re creating for your audience, there’s nothing wrong with using it.

• The seventh principle: is the price with confidence: remember who you are. Beyond talking about weight, taking action will enable you to create value for your audience. Change conversations to deliver unique value to your audience. Buyer audiences are results and not words.

Developments in supply chain management

In the 1970s, organizations tried to increase their competitiveness by standardizing and improving their internal processes to produce a product with better quality and lower cost. At that time, the prevailing thinking was that solid engineering and design, as well as coherent and coordinated production operations, were prerequisites for meeting market demands and, as a result, gaining more market share. For this reason, organizations focus their efforts on increasing efficiency.

In the 1980s, with the increase in diversity in the patterns expected by customers, organizations became increasingly interested in increasing flexibility in production lines and developing new products to satisfy customer needs.

In the 1990s, along with the improvement in production processes and reengineering patterns, the managers of many industries realized that to continue being in the market is not enough to improve the internal processes and flexibility in the company’s capabilities.

Still, the suppliers of parts and materials must also provide the best quality materials. and produce at the lowest cost.

Product distributors should also closely relate to the manufacturer’s market development policies. With such an attitude, approaches to supply chain and management came into existence.

On the other hand, with the rapid development of information technology in recent years and its wide application in supply chain management, many basic chain management activities are being carried out with new methods.