Question

The main objective of a supply chain is to maximize the overall value created. Briefly describe the importance to implement such objective across the supply chain rather than to individual member of the supply chain.

Answer 1

Supply chain is the strategic coordination among various business functions within the company with the objective of maximizing the overall value created for the customers. It not only includes the manufacturer and supplier but also transporters, warehouses, retailers, and customers themselves.

One challenge faced in the implementation of a supply chain management is that each member of supply chain tends to operate individually and tend to seek their own profit which often becomes conflicting. In simple words, each supply chain member tends to maximize its own objectives rather than objective of the entire system/company.

Hence it becomes very important for the company to implement the objective of maximizing the value created across the supply chain rather than to individual member of the supply chain. Overcoming the problem mentioned in paragraph 2 above and for implementing such objective across the supply chain, the company needs to have a level of information sharing and collaboration that is uncommon to most businesses since the major problem here is of decentralized decision-making which creates conflicts and therefore effective system of information sharing is needed among the members of supply chain to plan and control the supply chain in a proper way. Making customer demand data available to every member can also help as it will let every member know as to what is expected of them and they will perform accordingly.