Supply Chain Management-from supplier’s supplier to customer’s customer
Supply Chain Management, as defined by the world famous, Institute of Supply Management Inc., USA, is the design and management of seamless, value added process across organizational boundaries to meet the real needs of the end customer.
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, and finance and information technology.
The development and integration of people and technological resources are critical to successful supply chain integration. As the corporations strive to focus on core competencies and become more flexible, they have reduced their ownership of raw materials sources. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively. The effect has been to increase the number of companies involved in satisfying consumer demand while reducing the management control on daily logistics operations. Less control and more supply chain partners led to the creation of Supply Chain management concepts. The purpose of Supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity.
Thus the answer to the question “What is Supply Chain Management ? ” can be as Supply Chain Management is the process of planning , implementing and controlling the operations of the supply chain with the purpose of satisfying the customer’s requirement as efficiently as possible. Supply Chain spans all movement and storage of raw materials, Work-in-process, inventory and finished goods from the point of origin to the point of consumption.
According to the CSCMP, a professional association that developed the definition, Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities. It also includes coordination and collaboration with channel partners which can be suppliers, intermediaries, third party etc.
Supply Chain management must address the following problems:
Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers
Distribution strategy: Centralized Vs decentralized, cross docking, direct shipment, pull or push strategies, third party logistics
Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation
Thus Supply chain management (SCM) can also be described as the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service.
Supply chain management flows can be divided into three main flows:
- The product flow
- The information flow
- The finances flow
What is a Supply Chain?
The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.
In essence, Supply chain management integrates supply and demand management within and across companies. Some experts distinguish Supply Chain Management with Logistics while others consider the term to be interchangeable.
From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side to the supplier’s supplier and on the customer side by your customer’s customer.