Basics of supply chain management

Basics of supply chain management

Basics of supply chain management

Basics of Supply Chain Management is involved in the process of planning, implementing and controlling operations for serving customers as efficiently as possible. It encompasses all activities involved in sourcing, procurement, conversion and logistics. This is reflected in the operations of the tiffin-wallahs which focuses on optimization of activities in the supply chain with a view to transporting the finished product using various modes of transportation to distribution centers, and ultimately to customers. The entire process of tiffin collection and delivery and return journey of the tiffin box is a perfect example of excellence in supply chain management.

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Defining Supply Chain Management

A number of definitions are available in literature for Supply Chain Management. All these have a common theme – they reflect the idea of coordinating or integrating a number of product-related activities among supply chain participants to improve operating efficiencies, quality, and customer service in order to gain a sustainable competitive advantage for all of the organizations involved in this collaboration.
The Supply-Chain Council’s definition of supply chain management is “Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.”
The Council of Logistics Management defines supply chain management as “… the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purpose of improving the long-term performance of the individual companies and the supply chain as a whole.”
The Institute for Supply Management describes supply chain management as “the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration.”
‘Supply Chain Management’, for our purposes, is considered as the active management of supply chain activities by a firm to maximize customer value and achieve a sustainable competitive advantage, by paying attention to what is happening outside its four walls. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective and efficient ways possible with a unity in objectives.
SCM is involved with integrating three key flows, between the different stages, across the boundaries of the companies:
Product/Materials: This is the most obvious and visible part of the supply chain. Physically, the flow manifests itself in the form of goods and services. This is also called the ‘value flow’. Goods and service flows follow a similar sequence. For example, goods flows constitute raw materials (including material being transported), work in process, finished goods, and spares, and reverse flows due to returns, rework or recycling of the goods. The vendor side of these flows is called ‘upstream’ and the flows towards the customer are referred to as ‘downstream’.
Flow of Information: Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material to the supply chain. It consists of flows both from vendor to the customer and from the customer to the vendor. The downstream flow of information has important components like capacity estimates for plans, stocks available, dispatch advices, stock transfer notes, quality assurance reports, warranties, etc. The upstream components of information flow are inputs for forecasts, marketing plans, dispatch plans, production plans and procurement quantities and timing, orders from customers and dealers, quality feedback, and warranties.
Funds: This is the commercial part of the supply chain, and runs counter to the direction of the value flow. It reflects the money paid with respect to the transfer of title and/or service delivery in the supply chain. Other features of cash flow are credit periods/advances for payments from customers/dealers, and to vendors. The cash flow determines how the value flow is financed by the various actors in the supply chain.