In order for the end consumer to receive the product he needs, the raw materials from which he is created, go through several stages of the production process, transport and intermediary stages. The material-conducting chain thus includes various interconnected links. In the process of movement, the cost of the flow is constantly increasing. Studies show that more than 70% of the cost of a product is comprised of costs related to operations to promote it. Let us further consider what the material-conducting chain is, as well as what approaches exist to optimize costs.
General information
What is a material-conducting chain? The photo presented in the article illustrates the different options for delivering goods to the final consumer. As mentioned above, first the raw materials go to the manufacturing enterprise, where it turns into a product. After that, storage, packaging, transportation, and sale operations are performed. The material-conducting chain is the path that objects go from the primary raw material source to the final consumer. It includes various links involving specific operations at a certain cost.
Conducting Material Chain: Description
In each specific area of the economy, a stream of resources is formed, which moves from the source of raw materials to the consumer. What is the material chain for? The answer to this question is obvious. It is necessary to provide society with the goods it needs. It’s easy to understand what a material-conducting chain is. Difficulties may arise at the stage of cost optimization. After all, the main goal of enterprises is profit-making, and consumers - the acquisition of products at competitive prices. The cost of goods is formed primarily under the influence of production factors. The price of the product also includes the costs of storage, transportation, sales. The efficiency of flow control will depend on how the material-conducting circuit is used.
Main directions
In those areas where the material-conducting chain is used, various approaches are developed to optimize the costs of moving objects. They allow you to:
- Reduce inventory over the entire flow path .
- Reduce transportation costs.
- Reduce the duration of the passage of goods along the chain.
- Reduce manual labor and freight costs.
Stock Optimization Value
In the total amount of costs, the costs of their maintenance are more than 50%. Their structure, among other things, includes the costs of maintaining the administrative apparatus, losses from theft, damage to products. A large amount of working capital of enterprises, as a rule, is involved in stocks. Its share can be from 10 to 50%. In the production cycle, the costs of maintaining stocks are in the range of 25-30% of all costs. The reduction of resources is ensured by achieving a high level of coordination among the participants in the processes from which the material-conducting chain is formed. This is an increase in the reliability of supplies, and a rational distribution of stocks.
Time reduction
The material-conducting chain in logistics is formed by direct participants in the processes. Currently, the average product creation time in the total life cycle is 2-5%. Thus, operations on storage, packaging, transportation, sales take up most of the time. Reducing their duration helps to accelerate capital turnover and, accordingly, increase profits, as well as reduce the cost of products. To reduce transport costs, delivery routes are optimized, schedules are consistent, idle runs are reduced.
Integrative Qualities
Speaking about what a material-conducting chain is, it must be said that in the first place it acts as an object of constant analysis. Investigating the path of movement of objects from a raw material source to the final consumer, experts are developing new approaches to improve various indicators of the system. As part of this activity, the general organization of circuits is improved, the interconnection of their individual components is enhanced, and controllability is improved. The complex economic effect of this usually exceeds the overall development performance of the above indicators. This leads to the emergence of integrative properties. The whole material-conducting chain as a whole possesses these qualities, but not its individual components. Integrative properties are expressed in the ability of the system to achieve the ultimate goal. In this case, 6 rules are implemented:
- The desired product is determined.
- An indicator of good quality is established.
- The required quantity is determined.
- The time period within which the product is to be delivered is set.
- The delivery address is determined.
- A scheme to minimize costs is being developed.
The goal will be considered achieved when all these points are completed.
What is the material chain used for?
Currently, marketing has gained particular importance in the field of economic activity. It acts as a specific management system, through which production adapts to market requirements. This, in turn, helps to ensure the most profitable sale of products. The object of marketing research is primarily the material chain. During the analysis, specialists track and determine the demand that has arisen. In the process of research, information is collected and summarized about which particular product is needed on the market, what quality it should be, in what quantity, when, in what place it will be in demand.
The material-conducting chain in logistics ensures the promotion of the mass of goods to the buyer. Integration allows delivering products at the right time to the interested consumer and at the lowest cost. Marketing formulates the task of implementing a systematic approach to the formation of product movement. With its effective implementation, each stage should be planned as an integral component of a logically built and balanced system. Meanwhile, it should be said that the methods of technical and technological integration of the participants in commodity distribution act as the main object of study of logistics, and not marketing. The latter is focused on market analysis, psychological impact on consumers, advertising and so on. Logistic activity is aimed at the formation of technologically-technologically coupled models of the movement of objects along material-conducting chains. As part of this work, systems for controlling the movement of products are being created.
Link Marketing and Optimization
The system of adapting production to current market requirements became necessary due to the difficulties encountered in the sale of products. Marketing arose earlier than logistics. In the middle of the 20th century, the focus of production on the creation of demanded goods and the use of research methods of supply and demand became decisive factors in increasing competitiveness. At that time, the formation of end-to-end flow control systems was not particularly relevant. This was primarily due to the lack of technical capabilities for the implementation of such models. In addition, the marketing tools used at that time made it possible to break away from competitors. These tools are currently extremely scarce.
Demand, which is identified in the framework of marketing research, must be timely satisfied with fast and accurate delivery. It, in turn, is possible only with a well-functioning logistics system. Process optimization complements and develops marketing tools. Logistics allows you to connect the consumer, supplier, transport in a planned economic, technically-technologically coordinated and mobile chain. At the same time, the economic interests of all these entities are satisfied with minimal costs for the promotion of goods.
Optimization example
The essence of the logistic approach in flow management is to integrate specific process participants into one system. The purpose of its functioning is the ability to deliver goods to the addressee economically and quickly. The complexity of the implementation lies in the fact that during the process it is necessary to combine entities with different economic interests. As a first example, a material-conducting chain will be considered, within the framework of which sugar is delivered from a producer to a retailer. In this scheme, three parties are involved:
- Manufacturer.
- Warehouse.
- Chain stores.
Streamline optimization helps reduce total costs of product movement. This result is achieved by conducting various events. One of them is packaging optimization. Typically, sugar is packaged in production. Their capacity is usually 50 kg. The unoptimized flow of this product, therefore, represents the movement of bags from the manufacturer to the stores. The logistic approach involves close cooperation between all links in the chain. Let us assume that one owner acts as the indicated three participants. Where can he arrange the packing of sugar in bags? It can be done:
- Behind the store counter during customer service.
- At the point of sale, in the premises for the preparation of products for sale or at the workplace of an employee exclusively engaged in packaging.
- At a wholesale base in a special workshop.
- At the factory that produces the product.
Packing at the seller’s workplace or in a separate storeroom will be the least productive and most expensive. A certain economic result can be obtained if you organize the process at the wholesale warehouse. However, in practice, only in a limited number of bases can filling equipment be used at full capacity. The maximum effect is achieved when organizing the packaging process directly at the factory. Thus, if the owner of all participants in the chain is one entity, then he would create a packaging system at the manufacturer. In practice, the situation is usually different. All participants in the process are in the hands of various owners. Moreover, if the store benefits from the sale of pre-packaged sugar, the organization of packaging at the plant will require costs. So that the product does not pass through the entire chain in bags, it is necessary to adjust the interaction scheme of the process participants.
The solution of the problem
When bulk sugar is delivered to the retail network, all participants generally lose the opportunity to earn additional profit. This can be avoided if the subjects, united, solve the following problems:
- Determine the amount of additional profit that will arise during the organization of work on packaging at the manufacturing enterprise. In doing so, they should agree on a fair distribution of revenue.
- They will choose the technical means of ensuring the process of delivery of the packaged product to retail outlets. These include, in particular: packaging equipment that will be filled at the factory with packaged units, and then transported to stores through wholesale warehouses, special vehicles that will help ensure efficient transportation, equipment for unloading / loading and etc.
- They will agree on an interconnected, unified process for processing the flow from the packaging shop to the sales area.
- They will solve various problems by mathematical methods. For example, it may be the task of optimizing stocks at the stages of product movement, determining optimal batch volumes, and so on.
All the above solutions form a complex of mathematical tools. When using them, you can create an integrated material-conducting chain that provides profit only due to a qualitative change in flow control.
Reinforced concrete delivery optimization
Often, goods delivered on time are valued higher than those delivered earlier or later than the appointed time. As an example, consider the supply of reinforced concrete structures from a factory to construction sites. Concentration and processing of information about the needs of construction sites in specific products, data on the availability of a fleet of ready-to-use panel carriers, and on the production capacities of plants takes place in the information center. Every day, it develops delivery schedules for structures. They indicate the supplier and recipient of each product, the vehicle numbers by which the parts are delivered.
Schedule development is accurate to minutes. The panel is delivered from the manufacturer to the construction site by the time the workers need to install this particular part. The product is delivered to the floor "from the wheels" - directly from the panel truck. Due to such organization of delivery, the need for unloading and subsequent storage of reinforced concrete structures at the construction site is eliminated. Accordingly, the need for stocks in a large area of the construction area is reduced. The building can be constructed among trees, and not on the site, which is clogged with defective or not brought in time structures. Due to this optimization, the need to attract additional workers, financial resources, and equipment is reduced.
Mandatory conditions
For the effective functioning of the system for organizing the delivery of reinforced concrete structures from the plant to the construction site, it is necessary:
- The presence of special vehicles and technical equipment at the manufacturer and at the facilities. They must be technologically interconnected with each other and with the parameters of the products.
- Clearly define the sequence of actions of the persons responsible for them, the technology of operations.
- Solve the transportation problem. It involves optimizing routes, scheduling delivery.
- Mutually link the economic interests of all participants in the chain.
As a result, the necessary products will be delivered to the objects, in the proper quantity, at the appointed time and with minimal cost.