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