A supply chain is a global network that ensures the delivery of products and services domestically as well as internationally. A supply chain ensures product delivery from raw materials to the final customers, by using a definite structure involving an efficient network and productive information channel. The basic supply chain of any product involves raw materials, producer, distributor, retailer and the customer.
Traditional vs. Modern Supply Chain Management
There are three entities of the supply chain, i.e. supplier, producer, and the customer, who perform different functions:
- The supplier provides raw materials, services, components and energy to the producer (i.e. fabric).
- The producer produces finished goods by utilizing the components or services provided by the supplier (i.e. clothes).
- The end customer is the one who purchases and receives the final product after it has been successfully manufactured and shipped.
Evolution of supply chain management (SCM)
SCM was initiated in the beginning of the 20th century as an efficient networking system was needed for the transportation of perishable food products. The various development stages of SCM include: Creation Era, Integration Era, Globalization Era, Specialization Era – Phase 1, Specialization Era – Phase 2, and finally the SCM 2.0 which is the current phase.
SCM is the management of the chain of supplies, i.e. it is the management of the flow of goods and services right from supply of goods to the final consumer. The current phase of SCM, i.e. the SCM 2.0, involves multiple suppliers and customers and relies completely on automated business transactions.
Modern SCM is now a significant part of most freight companies. Thereby, SCM delivers unique value to small, medium, and large size businesses by providing the right technology and services.
What is traditional SCM?
The traditional form of SCM involves several, but simple, steps. Let us consider an example of notebooks to clearly understand the operational procedure of traditional SCM.
- Collection of raw materials: The first step involves the collection of raw materials required to make the final product. The raw materials concerned could be of a single type, or may include several other products to be collected from various sources.
- Collection of material from the suppliers: The manufacturers must acquire all the required raw materials to produce the ultimate finished product.
- Manufacturing: The manufacturer then initiates and completes all the processes required for producing the finished product. Various procedures may be involved like making paper, binding of papers, covering the book, etc. and different equipment may be used for each process. The company then packs the books together in boxes and prepares it for shipping and delivery.
- Distribution to the customers: A process where the finished product, i.e. the book in this example, is distributed to the retailers.
- Consumption by the end customers: The last step is the purchase of the finished products by the customer. In this example, the book may be used for the various purposes by different people.
This is how the traditional SCM system works. Today, as technology has been evolving greatly, traditional methods are being replaced by modern ideas and strategies. With the advancement in technology, SCM has become entirely digital and lead to a system called Modern SCM. Top freight shipping in Canada uses Modern SCM which is testament to the evolution of technology and its present influence on the logistics industry.
What makes Traditional SCM different from Modern SCM?
Here are the key differences between both:
- Traditional SCM focuses only on production and provision, whereas Modern SCM focuses on the needs of the customers in general. For example, most of the freight companies also aim to improve the value of the product delivered to the customer, rather than just focusing on the aspect of distribution.
- Modern SCM allows any business organization to experience the value in creating a partnership, whereas the traditional SCM allows listed companies to follow a single pathway.
- The organizations operating under Modern SCM create and provide value to the product which is consumed by the final customer. Whereas, traditional SCM has no such strategies to improve the value of the finished product.
- Modern technologies and strategies are incorporated into Modern SCM. Whereas the traditional SCM follows the old methods. To explain further, we can consider the example of a book that is yet to be published. The traditional system involves the collection of raw materials, supplying them to the manufacturer, manufacture of the book, printing of content, packing, shipping, and delivery. The Modern Supply Chain Management cuts down all these processes by simply publishing an e-book.
- Modern SCM allows faster progression than Traditional SCM. Modern SCM enables the companies to use highly advanced and integrated technology systems to ensure the expansion of the portfolio of the customers which does not happen with the traditional SCM.
- Modern SCM also utilizes logistics management which is a system that plans, implements, and controls the forward and reverse flow of goods. It ensures the process is effective and efficient, and also ensures the safe delivery of the goods. Unlike Modern SCM, Traditional SCM does not use any tool like logistics management which is used by most of the shipping across the world today. Freight shipping Canada uses the best resources to fulfill the needs of the customers.
- Modern SCM focuses more on building partnerships, alliances, and collaborations. With improved relationships with the suppliers, companies can build trust leading to long-term relationships. This has enhanced the export and import of goods to distant places too. For example, freight shipping USA to Canada.
- Posted by admin
- On May 14, 2020