| Supply chain management (SCM) is the process | | | | goods, conflicts with suppliers, etc. |
| of planning, organizing, implementing, and | | | | |
| controlling the operations of the supply | | | | Integration of Supply Chain Activities |
| chain for the purpose of satisfying the | | | | |
| customers' needs as efficiently as possible. | | | | Traditionally, planning, purchasing |
| SCM is responsible for all the storage and | | | | organizations, manufacturing, marketing and |
| movements of raw materials, work-in-process | | | | distribution along the supply chain is |
| inventory, and finished goods inventory from | | | | operated independently. These activities are |
| point of origin to point of consumption. | | | | carried out by different departments or |
| | | | organizations and each have their own |
| A supply chain network of an organization | | | | objectives and these are often conflicting. |
| includes the location as well as movement | | | | For example, Marketing's objective of high |
| decisions in respect of procurement of raw | | | | customer service and maximizing sales revenue |
| materials and other inputs, transformation of | | | | conflict with manufacturing and distribution |
| these materials into intermediate and | | | | goals. Many manufacturing operations are |
| finished products, and the distribution of | | | | designed to achieve lower costs with small |
| these finished products to customers. With | | | | consideration for distribution capabilities |
| effective and efficient Supply Chain | | | | and inventory levels. Such conflict makes it |
| Management (SCM) company can improve the way | | | | necessary to integrate all the functions of |
| it finds the raw components it needs to make | | | | supply chain network. Coordination between |
| a product or service and deliver it to | | | | these functional organizations in the chain |
| customers. SCM is significant for both | | | | is a key to attain a balanced supply chain |
| service and manufacturing organizations, | | | | network. |
| although the complexity of the chain may vary | | | | |
| greatly from industry to industry. | | | | Major Supply Chain Decisions: |
| | | | |
| Supply chain management includes five basic | | | | There are four major decision areas related |
| activities: planning and strategy | | | | to supply chain management: location, |
| formulation, sourcing, transformation | | | | production, inventory, and transportation. |
| process, delivery, and at last handling | | | | |
| customer complaints and excess stocks. | | | | Location |
| | | | |
| Planning and strategy formulation: | | | | Deciding on the location of manufacturing |
| | | | facilities, storage points, and sourcing |
| Company needs a strategy for managing all the | | | | points is first step in creating a supply |
| resources that go toward meeting customer | | | | chain. These should be taken carefully with |
| demands. Supply chain planning is carried out | | | | due consideration of the long term plans of |
| at corporate level as well as at operation | | | | the organization. The location of facilities |
| level. Strategy formulated at corporate level | | | | further guide management about how to reach |
| is for long term horizon and includes | | | | customer market also it has a great impact on |
| decision on main objectives of supply chain | | | | revenue, cost, and level of service. These |
| in terms of customer service, formulating | | | | decisions are normally based some of these |
| policies, designing supply chain, strategic | | | | factors: proximity to raw material source or |
| alliances, etc. Operational level planning is | | | | customer market, production costs, taxes, |
| for short term, and focuses on activities | | | | tariffs, duties and duty drawback, |
| over a day-to-day basis. The effort is to | | | | transportation costs, production limitations, |
| effectively and efficiently manage the | | | | etc. |
| product flow in order to fulfill the | | | | |
| strategic goals. | | | | Production |
| | | | |
| Sourcing: | | | | Decisions like what to produce, capacity of |
| | | | plant, production scheduling, equipment |
| First generate the list of suppliers | | | | maintenance, workload balancing, quality |
| supplying the required inputs, evaluate each | | | | control, etc. These decisions also have a |
| of them on the basis of relevant criterion as | | | | great impact on the revenues, costs and |
| price, quality, delivery time, etc. Now | | | | customer service levels of the firm. |
| choose the best supplier. Develop a set of | | | | |
| pricing, delivery and payment processes with | | | | Inventory |
| suppliers and make efforts for monitoring and | | | | |
| improving the relationships. Also make sure | | | | Inventory includes raw material, |
| the proper management of inventory of goods | | | | semi-finished and finished goods. They can be |
| and services received from suppliers, | | | | in-process between locations. The primary |
| including receiving shipments, verifying | | | | purpose is to buffer against any uncertainty |
| them, moving them to manufacturing facilities | | | | that might be in the supply chain. Decision |
| and authorizing supplier payments. | | | | relating to inventory should consider |
| | | | carrying/holding cost, ordering cost, and |
| Transformation process: | | | | opportunity cost. As inventory cost |
| | | | constitutes the big part of the total cost, |
| It includes Scheduling the activities | | | | it is critical decision in supply chain |
| necessary for production, testing, packaging | | | | operation. It also includes the determination |
| and preparation for delivery and also | | | | of the optimal levels of order quantities and |
| ensuring the smooth production, high quality | | | | reorder points, and setting safety stock |
| levels and improved worker productivity. | | | | levels, at each stocking location. These |
| | | | levels are vital as they are primary |
| Delivery: | | | | determinants of customer service levels. |
| | | | |
| This part of supply chain is many times | | | | Transportation: |
| referred as logistics by many companies. It | | | | |
| includes coordinating the receipt of orders | | | | These decisions are closely linked to the |
| from customers, developing a network of | | | | inventory decisions, as the decision are |
| warehouses, arranging for pick carriers to | | | | based on trade-off between cost involved |
| move products to customers and setting up an | | | | using the particular mode of transportation |
| invoicing system to receive payments. | | | | and the indirect cost of inventory associated |
| | | | with that mode. For example air shipments may |
| Handling customer complaints and excess | | | | be fast, reliable, and requires lesser safety |
| stocks: | | | | stocks, they are expensive. While other modes |
| | | | like rail and road are though less costly but |
| This part of supply chain deal with the | | | | requires maintaining high level of safety |
| problems that originate while carrying out | | | | stock due to high level of uncertainty |
| the above activities like receiving defective | | | | involved. Also the customer service levels |
| and excess products back from customers, | | | | and geographic location influence such |
| Wrong order placement, delay in receiving | | | | decisions. |