MODULE 2
Supply chain management
The term “supply chain management” was coined by Keith Oliver, a leading British logistician who
first mentioned this concept in an interview with Financial Times in 1982.
In a traditional manufacturing environment, supply chain management meant managing movement
and storage of raw materials, work-in-progress inventory, and finished goods from point of origin to
point of consumption. It involves managing the network of interconnected smaller business units,
networks of channels that take part in producing a merchandise of a service package required by the
end users or customers.
With businesses crossing the barriers of local markets and reaching out to a global scenario, SCM is
now defined as –
“Design, planning, execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring performance globally.”
Five Functions of Supply Chain Management
The five functions of supply chain management include the following:
1. Purchasing
The first function of supply chain management is purchasing. In the manufacturing process, raw
materials are required to produce goods and products. It is important that these materials are procured
and delivered on time so that production can begin. For this to occur, coordination with suppliers and
delivery companies will be required to avoid any potential delays.
2. Operations
Demand planning and forecasting are usually required before materials can be procured, as the
demand market will dictate how many units to be produced and how much material is required for
production. This function is important in supply chain management as organizations must accurately
forecast demand to avoid having too much or too little inventory that will lead to losses in revenue.
Therefore, demand planning and forecasting must be tied in with inventory management, production,
and shipping to avoid such mistakes.
3. Logistics
Logistics is the part of supply chain management that coordinates all aspects of planning, purchasing,
production, warehousing, and transportation so that the products will reach the end-consumer without
any hindrances. It is helpful to have adequate communication between multiple departments so that
products can be shipped to customers quickly and at the lowest cost.
4. Resource Management
Production consumes raw materials, technology, time, and labor. Resource management ensures that
the right resources are allocated to the right activities in an optimized manner. This will ensure that an
optimized production schedule is created to maximize the efficiency of the operations. When
calculating the available capacity, you should consider the capabilities of each resource and determine
whether they can perform the work that is scheduled on it. This will ensure that you are not
over-promising orders and that your production schedule is feasible and accurate.
5. Information Workflow
Information sharing and distribution is what keeps all of the other functions of supply chain
management on track. If the information workflow and communication are poor, it could break apart
the entire chain. Many disruptions that arise in supply chains can be prevented by increased visibility
and communication. Having a consistent system that is used by all departments will ensure that
everyone is working with the same set of data and will prevent miscommunications and time spent
updating everyone on new developments.
,Objectives of SCM
To decrease inventory cost by more accurately predicting demand and scheduling production to match
it.
To reduce overall production cost by streamlining production and by improving information flow.
To improve customer satisfaction.
Features of SCM
Scope of SCM
Supplier Management
Inventory Mangement
Distribution Management
Channel Management
Payment Management
Financial Management
Salesforce Management
Customer Relationship Management
Customer Service Management
Demand Management
Customer Order Fulfillment
Manufacturing Flow Management
Procurement Management
Product Development and Commercialization
Returns Management
Main supply chain management modules
Supply chain management software
Supply chain management software is a business tool that helps you manage your supply chain with
greater efficiency. Most software systems have rich features that can streamline your supply chain
operations from start to finish.
, Many different types of supply chain management software exist. Some come as a standalone
application or program; others are a part of broader solutions, such as customer relationship and
enterprise resource planning systems.
The most common features of supply chain management software include:
Procurement
Procurement, or obtaining materials, goods, and services you need to run your business is the very
first element of a supply chain.
The procurement cycle involves multiple steps — analyzing and selecting vendors, negotiating terms,
ordering, and invoicing, to name a few. The significant part of these procedures can be delegated
to procurement management software. This will speed up the workflow, enhance transparency, save
time, and, finally, reduce costs, a key priority for 78 percent of procurement leaders.
The core functionality of procurement software covers the following areas.
E-sourcing. Before buying materials or goods to run your business, it’s vital to collect, check, and
compare information about different vendors to choose the best one. E-sourcing automates several
steps of the traditional sourcing routine.
Preliminary data collection. The system sends a standard electronic pre-purchase questionnaire (PPQ)
and request for quotation (RFQ) to each potential vendor. After filling in the forms, vendors upload
their answers into software, giving procurement managers instant access to all the information.
Automated evaluation. At all stages of procurement, e-sourcing solutions use analytical tools to sort
through documents sent by suppliers, draw and process essential information, verify compliance of a
vendor with business requirements, compare prices and other metrics, and highlight unsuitable
proposals. The results can be displayed on the dashboard as informative data visualizations.
Invitation to tender (ITT). Vendors sorted out for the next stage of sourcing automatically receive
invitations to tender forms that specify requirements of organization and details of the evaluation
process.
E-auction. Vendors invited to tender and submit their bids to the shared platform. All parties involved
have access to all bids and compare offers, which prompts suppliers to reduce prices.
Inventory management
Inventory can be defined as all goods and materials a company keeps on hand to meet customer
demand. There are four major categories of inventory:
1.raw materials.
2.work-in-process (WIP), or components, assemblies, and partially finished goods waiting for
completion.
3.finished/packaged goods.
4.maintenance, repair, and operating (MRO) items, necessary to support and maintain a production
process. This category spans all goods that keep business operations running, from industrial
equipment and computers to uniforms and office supplies.
Supply chain management
The term “supply chain management” was coined by Keith Oliver, a leading British logistician who
first mentioned this concept in an interview with Financial Times in 1982.
In a traditional manufacturing environment, supply chain management meant managing movement
and storage of raw materials, work-in-progress inventory, and finished goods from point of origin to
point of consumption. It involves managing the network of interconnected smaller business units,
networks of channels that take part in producing a merchandise of a service package required by the
end users or customers.
With businesses crossing the barriers of local markets and reaching out to a global scenario, SCM is
now defined as –
“Design, planning, execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring performance globally.”
Five Functions of Supply Chain Management
The five functions of supply chain management include the following:
1. Purchasing
The first function of supply chain management is purchasing. In the manufacturing process, raw
materials are required to produce goods and products. It is important that these materials are procured
and delivered on time so that production can begin. For this to occur, coordination with suppliers and
delivery companies will be required to avoid any potential delays.
2. Operations
Demand planning and forecasting are usually required before materials can be procured, as the
demand market will dictate how many units to be produced and how much material is required for
production. This function is important in supply chain management as organizations must accurately
forecast demand to avoid having too much or too little inventory that will lead to losses in revenue.
Therefore, demand planning and forecasting must be tied in with inventory management, production,
and shipping to avoid such mistakes.
3. Logistics
Logistics is the part of supply chain management that coordinates all aspects of planning, purchasing,
production, warehousing, and transportation so that the products will reach the end-consumer without
any hindrances. It is helpful to have adequate communication between multiple departments so that
products can be shipped to customers quickly and at the lowest cost.
4. Resource Management
Production consumes raw materials, technology, time, and labor. Resource management ensures that
the right resources are allocated to the right activities in an optimized manner. This will ensure that an
optimized production schedule is created to maximize the efficiency of the operations. When
calculating the available capacity, you should consider the capabilities of each resource and determine
whether they can perform the work that is scheduled on it. This will ensure that you are not
over-promising orders and that your production schedule is feasible and accurate.
5. Information Workflow
Information sharing and distribution is what keeps all of the other functions of supply chain
management on track. If the information workflow and communication are poor, it could break apart
the entire chain. Many disruptions that arise in supply chains can be prevented by increased visibility
and communication. Having a consistent system that is used by all departments will ensure that
everyone is working with the same set of data and will prevent miscommunications and time spent
updating everyone on new developments.
,Objectives of SCM
To decrease inventory cost by more accurately predicting demand and scheduling production to match
it.
To reduce overall production cost by streamlining production and by improving information flow.
To improve customer satisfaction.
Features of SCM
Scope of SCM
Supplier Management
Inventory Mangement
Distribution Management
Channel Management
Payment Management
Financial Management
Salesforce Management
Customer Relationship Management
Customer Service Management
Demand Management
Customer Order Fulfillment
Manufacturing Flow Management
Procurement Management
Product Development and Commercialization
Returns Management
Main supply chain management modules
Supply chain management software
Supply chain management software is a business tool that helps you manage your supply chain with
greater efficiency. Most software systems have rich features that can streamline your supply chain
operations from start to finish.
, Many different types of supply chain management software exist. Some come as a standalone
application or program; others are a part of broader solutions, such as customer relationship and
enterprise resource planning systems.
The most common features of supply chain management software include:
Procurement
Procurement, or obtaining materials, goods, and services you need to run your business is the very
first element of a supply chain.
The procurement cycle involves multiple steps — analyzing and selecting vendors, negotiating terms,
ordering, and invoicing, to name a few. The significant part of these procedures can be delegated
to procurement management software. This will speed up the workflow, enhance transparency, save
time, and, finally, reduce costs, a key priority for 78 percent of procurement leaders.
The core functionality of procurement software covers the following areas.
E-sourcing. Before buying materials or goods to run your business, it’s vital to collect, check, and
compare information about different vendors to choose the best one. E-sourcing automates several
steps of the traditional sourcing routine.
Preliminary data collection. The system sends a standard electronic pre-purchase questionnaire (PPQ)
and request for quotation (RFQ) to each potential vendor. After filling in the forms, vendors upload
their answers into software, giving procurement managers instant access to all the information.
Automated evaluation. At all stages of procurement, e-sourcing solutions use analytical tools to sort
through documents sent by suppliers, draw and process essential information, verify compliance of a
vendor with business requirements, compare prices and other metrics, and highlight unsuitable
proposals. The results can be displayed on the dashboard as informative data visualizations.
Invitation to tender (ITT). Vendors sorted out for the next stage of sourcing automatically receive
invitations to tender forms that specify requirements of organization and details of the evaluation
process.
E-auction. Vendors invited to tender and submit their bids to the shared platform. All parties involved
have access to all bids and compare offers, which prompts suppliers to reduce prices.
Inventory management
Inventory can be defined as all goods and materials a company keeps on hand to meet customer
demand. There are four major categories of inventory:
1.raw materials.
2.work-in-process (WIP), or components, assemblies, and partially finished goods waiting for
completion.
3.finished/packaged goods.
4.maintenance, repair, and operating (MRO) items, necessary to support and maintain a production
process. This category spans all goods that keep business operations running, from industrial
equipment and computers to uniforms and office supplies.
