One of the highest costs a business incurs is the cost of supplying goods to customers. Any inefficiency in the supply chain results in unnecessary costs. This inefficiency is the result of various components such as transportation, warehouse and inventory being independent of each other. The challenge for supply chain management is to integrate all these components and measure their effectiveness. The article examines the components of the supply chain and how to design an efficient supply chain. For this the author suggests a three-phase methodology. The first phase involves an audit of the current supply chain, the second phase involves collection and analysis of data and the third phase is that of implementation.

Supplying goods to customers is one of the highest costs of business. It is the second highest cost after material in manufacturing. Therefore, supply chain inefficiencies generate unnecessary costs in an exponential manner. This is often due to the fact that logistics is seen as a series of independent components allowing tasks and costs to be duplicated easily. The concept of supply chain management is based on the integration of these components and the measurement of their effectiveness. We shall, in the first instance, examine the components of the supply chain and then look at the design process.

Transportation is probably the most visible cost of the supply chain and therefore has traditionally received a lot of attention. Companies are regularly undertaking studies to reduce the transportation costs and often the result is a mixture of consolidation, higher volume and slower means of transport. In terms of supply, this approach is still viable, however, the savings are measured on the total of the supply network and not only on transportation.

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