Supply
chain management (SCM) is the process ofplanning, organizing, implementing, and controlling the operations of the
Supply chain for the purposeofsatisfyingthe customers’ needs as efficiently as possible. SCM isresponsible for all the storage and movements of raw materials, work-in-processinventory, and finished goods
inventory from point of origin to point ofconsumption.A supply chain network of anorganization includes the location as well as movement
decisions in respect ofprocurement of raw materials and other inputs, transformation of thesematerials into intermediate and finished products, and the distribution ofthese finished products to customers. With effective and efficient Supply ChainManagement (SCM) company can improve the way it finds the raw components itneeds to make a product or service and deliver it to customers. SCM issignificant for both service and manufacturing organizations, although thecomplexity of the chain may vary greatly from industry to industry.Supply chain managementincludes five basic activities: planning and strategy formulation, sourcing,transformation process, delivery, and at last handling
customer complaints andexcess stocks. Planningand strategy formulation: Company needs a strategy formanaging all the resources that go toward meeting customer demands. Supplychain planning is carried out at corporate
level as well as at operation level.Strategy formulated at corporate level is for long term horizon and includesdecision on main objectives of supply chain in terms of customer service,formulating policies, designing supply chain, strategic alliances, etc.Operational level planning is for short term, and focuses on activities over aday-to-day basis. The effort is to effectively and efficiently manage theproduct flow in order to fulfill the strategic goals. Sourcing: First generate the list ofsuppliers supplying the required inputs, evaluate each of them on the basis ofrelevant criterion as price, quality, delivery time, etc. Now choose the bestsupplier. Develop a set of pricing, delivery and payment processes withsuppliers and make efforts for monitoring and improving the relationships. Alsomake sure the proper management of inventory of goods and services receivedfrom suppliers, including receiving shipments, verifying them, moving them tomanufacturing facilities and authorizing supplier payments. Transformationprocess:It includes Scheduling theactivities necessary for production, testing, packaging and preparation fordelivery and also ensuring the smooth production, high quality levels andimproved worker productivity. Delivery:This part of supply chain ismany times referred as logistics by many companies. It includes coordinatingthe receipt of orders from customers, developing a network of warehouses,arranging for pick carriers to move products to customers and setting up aninvoicing system to receive payments. Handlingcustomer complaints and excess stocks: This part of supply chaindeal with the problems that originate while carrying out the above activitieslike receiving defective and excess products back from customers, Wrong orderplacement, delay in receiving goods, conflicts with suppliers, etc. Integrationof Supply Chain ActivitiesTraditionally, planning,purchasing organizations, manufacturing, marketing and distribution along thesupply chain is operated independently. These activities are carried out bydifferent departments or organizations and each have their own objectives andthese are often conflicting. For example, Marketing's objective of highcustomer service and maximizing sales revenue conflict with manufacturing anddistribution goals. Many manufacturing operations are designed to achieve lowercosts with small consideration for distribution capabilities and inventorylevels. Such conflict makes it necessary to integrate all the functions ofsupply chain network. Coordination between these functional organizations inthe chain is a key to attain a balanced supply chain networkMajorSupply Chain Decisions:There are four major decisionareas related to supply chain management: location, production, inventory, andtransportation. Location Deciding on the location ofmanufacturing facilities, storage points, and sourcing points is first step increating a supply chain. These should be taken carefully with due considerationof the long term plans of the organization. The location of facilities furtherguide management about how to reach customer market also it has a great impacton revenue, cost, and level of service. These decisions are normally based someof these factors: proximity to raw material source or customer market, productioncosts, taxes, tariffs, duties and duty drawback, transportation costs,production limitations, etc. Production Decisions like what toproduce, capacity of plant, production scheduling, equipment maintenance,workload balancing, quality control, etc. These decisions also have a greatimpact on the revenues, costs and customer service levels of the firm. Inventory Inventory includes rawmaterial, semi-finished and finished goods. They can be in-process betweenlocations. The primary purpose is to buffer against any uncertainty that mightbe in the supply chain. Decision relating to inventory should considercarrying/holding cost, ordering cost, and opportunity cost. As inventory costconstitutes the big part of the total cost, it is critical decision in supplychain operation. It also includes the determination of the optimal levels oforder quantities and reorder points, and setting safety stock levels, at eachstocking location. These levels are vital as they are primary determinants ofcustomer service levels. Transportation:These decisions are closelylinked to the inventory decisions, as the decision are based on trade-offbetween
cost involved using the particular mode of transportation and theindirect cost of inventory associated with that mode. For example air shipmentsmay be fast, reliable, and requires lesser safety stocks, they are expensive.While other modes like rail and road are though less costly but requiresmaintaining high level of safety stock due to high level of uncertainty involved.Also the customer service levels and geographic location influence suchdecisions. More Article: -www.shipping-exchange.comAboutShipping-Exchange.comShipping-Exchange.com integratesshipping and logistics community worldwide to improve economies of freight.Vision and efforts of many industry professionals is helping Shipping-Exchange.com towardsbecoming the world's largest shipping and logistics portal. It enjoys industrysupport by maintaining an un-biased approach and offering all services andfeatures absolutely free. You can visit this portal at http://www.shipping-exchange.comSource by: http://www.shipping-exchange.com/articles/su pply_chain_article/p1/wbnamcf/basics-of-supply.htm
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