Supply Chain- A simple walkthrough

Supply Chain Management, a simple walkthrough.

A supply chain is a focus on the core activities within our organization required to convert raw materials or component parts through to finished products or services. A supply chain is an entire system of producing and delivering a product or service, from the very beginning stage of sourcing the raw materials to the final delivery of the product or service to end-users. The supply chain lays out all aspects of the production process, including the activities involved at each stage, information that is being communicated, natural resources that are transformed into useful materials, human resources, and other components that go into the finished product or service.

CSCMP (The Council of Supply Chain Management Professionals)’s Definition of Supply Chain Management

Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Supply chain management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance, and information technology.

What is Operation Management and how does it different from Supply Chain Management?

Operations management is the process that generally plans, controls and supervises manufacturing and production processes and service delivery. Operations management is important in a business organization because it helps effectively manage, control and supervise goods, services and people. This field focuses on the efficient and effective functioning of a business. It includes maintenance, analysis of the production systems, and material planning. An operations manager coordinates with the internal operations, not telling how the products or services are moved but how they are developed.

Major Differences between Supply Chain Management and Operations Management

The main difference between these areas is that supply chain management is concerned with what happens outside the organization – getting materials and delivering products. On the other hand, operations management is concerned with what happens inside the organization. This major difference means that the supply chain management professionals spend time evaluating suppliers, negotiating contracts, while the operations management professionals are often involved in planning and managing the day-to-day operations and processes.

Difference of Procurement and Supply Chain

Procurement is a vital business function. When managed efficiently and done well, it can help increase your business’s profitability. Traditionally, some businesses have used the term procurement synonymously with purchasing. But now, purchasing is often seen as just one stage in a larger, more strategic procurement process. Procurement involves every activity involved in obtaining the goods and services a company needs to support its daily operations, including sourcing, negotiating terms, purchasing items, receiving and inspecting goods as necessary and keeping records of all the steps in the process.

Procurement is an important step in understanding supply chains, because it helps a company find reliable suppliers that can provide competitively priced goods and services that match the company’s needs. That’s the case whether the company is seeking raw materials for manufacturing, a marketing services provider or new office supplies.

Steps in the Procurement Process

Identify which goods and services the company needs.

Submit purchase request.

Assess and select vendors.

Negotiate price and terms.

Create a purchase order.

Receive and inspect the delivered goods.

Inspection/Matching process

Approve the invoice and arrange payment.

Recordkeeping

Difference between Logistics and Supply Chain

CSCMP’s Definition of Logistics Management

Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements.

Logistics management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory control, supply/demand planning and management of third-party logistics services providers. Good logistics management ensures that products are shipped in the most economical, safe, efficient and timely manner. This results in cost savings for the company and more satisfied customers.

Poor logistics management can result in damaged or delayed shipments, which can then lead to dissatisfied customers, returns and scrapped products. The consequences of these problems include higher costs and customer relation problems. In order to avoid these results, effective logistics management includes careful planning, proper software system selection, proper vetting and selection of outsourced vendors, and adequate resources to handle the processes.

Components of Supply Chain

Planning

Supply chain planning (SCP) is the process of anticipating the demand for products and planning their materials and components, production, marketing, distribution and sale. Its overall goal is to balance supply and demand so sales revenue opportunities are fully exploited in a timely manner and at the lowest possible cost.

The supply chain planning process almost always begins with demand planning, in which a team consisting of people from sales, marketing and production creates a sales forecast based on historical data and other information.

Supply chain planning provides other advantages, including the following:

Data collection. Having access to precise, real-time data can improve decision-making and facilitate time-sensitive processes, such as just-in-time manufacturing.

Inventory management. Up-to-date inventory data can enable lean production and lower overhead.

Efficiency. Accurate demand and production plans can help companies identify inefficiencies, including raw materials waste and excess inventory.

Improved customer satisfaction. Tracking customer sentiment and product demand can improve profit margins.

Sourcing

What is Sourcing?

Sourcing is the stage that comes before any purchases are made and can be considered a subsection of the procurement department. Before you can procure materials from your suppliers, you must first find and vet those suppliers. When you have an effective strategic sourcing process in place, you’ll find reliable, affordable, and quality suppliers to supply the goods you need. Good work here makes the procurement process more streamlined and efficient.

Sourcing is about finding the balance between the quality of raw materials and the affordability. The less you can spend on materials, the more profit your business can earn. But, if you are too cheap and buy shoddy materials, your resulting product is of lesser quality. It is important to retain standards of quality because your customers want quality, too!

Logistics

Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their final destination. Logistics management involves identifying prospective distributors and suppliers and determining their effectiveness and accessibility.

"Logistics" was initially a military-based term used in reference to how military personnel obtained, stored, and moved equipment and supplies. The term is now used widely in the business sector, particularly by companies in the manufacturing sectors, to refer to how resources are handled and moved along the supply chain.

Customer Service

Customer service is everywhere along the supply chain, it affects the way it begins when products are sold to the customer and it is there when products are delivered. Through the processes of manufacturing, distributing and selling the finished goods, companies should focus their efforts on supply an excellent assistance to their clients, answering their questions and counting on their feedback to improve their operations

Companies should measure the way customers respond to their service and the way those numbers affect their sales. It is very likely that companies with better customer service along their supply chain will have better sales than those who barely care about their relationship with their clients.

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