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An Introductionto Supply Chain Management

Supply chain management involves coordinating a network of businesses involved in providing products to customers. A supply chain starts with a customer order and includes planning, purchasing, inventory, production, transportation, and ends with delivery to the customer. Companies implement supply chain management strategies and technologies at strategic, tactical, and operational levels to efficiently move products through the chain and maximize customer satisfaction with the lowest costs.

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15 views

An Introductionto Supply Chain Management

Supply chain management involves coordinating a network of businesses involved in providing products to customers. A supply chain starts with a customer order and includes planning, purchasing, inventory, production, transportation, and ends with delivery to the customer. Companies implement supply chain management strategies and technologies at strategic, tactical, and operational levels to efficiently move products through the chain and maximize customer satisfaction with the lowest costs.

Uploaded by

Rakheeb pasha
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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An Introduction to Supply Chain Management

Supply chain management (SCM) is the management of a network of


interconnected businesses involved in the ultimate provision of product and
service packages required by end customers. Supply Chain Management spans
all movement and storage of raw materials, work-in-process inventory, and
finished goods from point of origin to point of consumption (supply chain).

A simple supply chain is made up of several elements that are linked by the
movement of products along it. The supply chain starts and ends with the
customer.

Customer: The customer starts the chain of events when they decide to
purchase a product that has been offered for sale by a company. The customer
contacts the sales department of the company, which enters the sales order for a
specific quantity to be delivered on a specific date. If the product has to be
manufactured, the sales order will include a requirement that needs to be fulfilled
by the production facility.

Planning: The requirement triggered by the customer's sales order will be


combined with other orders. The planning department will create a production
plan to produce the products to fulfill the customer's orders. To manufacture the
products the company will then have to purchase the raw materials needed.

Purchasing: The purchasing department receives a list of raw materials and


services required by the production department to complete the customer's
orders. The purchasing department sends purchase orders to selected suppliers
to deliver the necessary raw materials to the manufacturing site on the required
date.

Inventory: The raw materials are received from the suppliers, checked for quality
and accuracy and moved into the warehouse. The supplier will then send an
invoice to the company for the items they delivered. The raw materials are stored
until they are required by the production department.

Production: Based on a production plan, the raw materials are moved inventory
to the production area. The finished products ordered by the customer are
manufactured using the raw materials purchased from suppliers. After the items
have been completed and tested, they are stored back in the warehouse prior to
delivery to the customer.

Transportation: When the finished product arrives in the warehouse, the


shipping department determines the most efficient method to ship the products so
that they are delivered on or before the date specified by the customer. When the
goods are received by the customer, the company will send an invoice for the
delivered products.

Supply Chain Management

To ensure that the supply chain is operating as efficient as possible and


generating the highest level of customer satisfaction at the lowest cost,
companies have adopted Supply Chain Management processes and associated
technology. Supply Chain Management has three levels of activities that different
parts of the company will focus on: strategic; tactical; and operational.

Strategic: At this level, company management will be looking to high level


strategic decisions concerning the whole organization, such as the size and
location of manufacturing sites, partnerships with suppliers, products to be
manufactured and sales markets:

 Strategic network optimization, including the number, location, and size of


warehousing, distribution centers, and facilities.
 Strategic partnerships with suppliers, distributors, and customers, creating
communication channels for critical information and operational
improvements such as cross docking, direct shipping, and third-party
logistics.
 Product life cycle management so that new and existing products can be
optimally integrated into the supply chain and capacity management
activities.
 information technology infrastructure to support supply chain operations.
 Where-to-make and what-to-make-or-buy decisions.
 Aligning overall organizational strategy with supply strategy.

Tactical: Tactical decisions focus on adopting measures that will produce


cost benefits such as using industry best practices, developing a purchasing
strategy with favored suppliers, working with logistics companies to develop cost
effect transportation and developing warehouse strategies to reduce the cost of
storing inventory:

 Sourcing contracts and other purchasing decisions.


 Production decisions, including contracting, scheduling, and planning
process definition.
 Inventory decisions, including quantity, location, and quality of inventory.
 Transportation strategy, including frequency, routes, and contracting.
 Benchmarking of all operations against competitors and implementation of
best practices throughout the enterprise.
 Milestone payments.
 Focus on customer demand.

Operational: Decisions at this level are made each day in businesses that affect
how the products move along the supply chain. Operational decisions involve
making schedule changes to production, purchasing agreements with suppliers,
taking orders from customers and moving products in the warehouse:

 Daily production and distribution planning, including all nodes in the supply
chain.
 Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
 Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
 Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
 Inbound operations, including transportation from suppliers and receiving
inventory.
 Production operations, including the consumption of materials and flow of
finished goods.
 Outbound operations, including all fulfillment activities, warehousing and
transportation to customers.
 Order promising, accounting for all constraints in the supply chain,
including all suppliers, manufacturing facilities, distribution centers, and
other customers.

 Supply Chain Management Technology

Organizations increasingly find that they must rely on effective supply chains, or
networks, to successfully compete in the global market and networked economy.
In Peter Drucker's (1998) new management paradigms, this concept of business
relationships extends beyond traditional enterprise boundaries and seeks to
organize entire business processes throughout a value chain of multiple
companies.

If a company expects to achieve benefits from their supply chain management


process, they will require some level of investment in technology. The backbone
for many large companies has been the vastly expensive Enterprise Resource
Planning (ERP) suites, such as SAP and Oracle.

Since the wide adoption of Internet technologies, all businesses can take
advantage of Web-based software and Internet communications. Instant
communication between vendors and customers allows for timely updates of
information, which is key in management of the supply chain.

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