Supply Chain Management

 

Supply chain management encompasses managing purchasing activities and supplier relationships to managing processes at manufacturing units to distribution management of finished goods through warehouses to stores.

 

There are many closely related terms which are used interchangeably but they have some differences.

 

Logistics management: You can think of logistics management as the bridge between supplier relationship, manufacturing, warehousing, stores etc. Whereas most of the processes inside the 4 walls of any business organization (be it supplier, manufacturer, distributor or retailer) are managed by the organizations themselves; the logistics bridges between these organizations (movement of goods) are managed by 3rd party logistics providers.

 

Supply chain management: Whereas logistics management manages only the aspect of creating and maintaining the bridge, supply chain management deals with bringing in efficiency and lowering costs of logistics operations as well as costs of goods through bigger scale-of-operations, better planning, creating common market places etc. So logistics management is a bridge and supply chain management is the technique through which goods are passed through the bridge in the most economical way.

 

Value chain: It is a similar term like supply chain management with some difference. Whereas supply chain management may focus on bringing efficiencies in logistics operations, value chain focuses more on reducing overall operations costs by streamlining and aligning planning and execution of supply chain parts.

The final goal for any supply chain is to provide competitively priced goods in desired quantities at convenient location at required times. To achieve this objective, every part of the supply chain from supplier to manufacturer, to distributor, to warehouses and to retailer should be streamlined and linked tightly with each other so that complete visibility is there at each point. The demand should be clearly visible at each point within relevant timeframe so that the supply can be matched within that timeframe. For arranging for required supply, a good planning is required at each point. The supply can be arranged by making the product or buying from outside.

For complete visibility into the entire supply chain a good technique is there named Collaborative Planning, Forecasting and Replenishment (CPFR). This a score card system where each participant in the supply chain has to abide by certain regulations to make.

CPFR is a concept that aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain. Information shared between suppliers, manufacturers, distributors, 3PL service providers and retailers aids in planning and satisfying customer demands through a supportive system of shared information. This allows for continuous updating of inventory and upcoming requirements, making the end-to-end supply chain process more efficient. Efficiency is created through the decreased expenditures for merchandizing, inventory, logistics, and transportation across all trading partners.

Outbound Logistics

Manufactured goods need to be sent to warehouses for distribution. For this, outbound logistics management is used. If the manufacturing and distribution functions are owned by the same owner then the outbound logistics function could be in-house managed otherwise it will be an outsourced service.

Manufacturer

There are many complex processes at manufacturing sites. Goods and raw material from suppliers are transformed using machines at different process steps and the final outcome is the finished goods. There are many manufacturing techniques depending on the kind of finished goods which are to be manufactured. For example, for making cars, sub-assemblies and auto parts are supplied by suppliers to car manufacturing sites. Many of the manufacturing steps are performed at the manufacturing site. But full assembly of the car is done at assembly sites which are nearer to car dealer locations to save transportation costs. In case of process industries, like pharmaceutical, cement, food, chemicals etc. manufacturing is done in mass mode and distributed to various warehouses located at scattered and far away geographies. In certain industries like textiles and carpet industry,

Manufacturers use many kinds of software to help in their marketing, accounting, operations functions. They use production planning, material requirement planning, manufacturing execution and ERP software for managing their internal needs. For external needs they use supplier relationship management, customer relationship management, supply chain collaboration management, demand planning, spend management etc.

Inbound transportation management

 

For goods to reach manufacturer from supplier, it has to be transported via surface, air or sea route. Depending on the quantity of goods, kind of goods, lead time and availability of transport mode between supplier site and manufacturing site; a suitable transportation equipment has to be selected. Most of the time, since transportation is not the core business focus of either supplier or the manufacturer, it is outsourced to a 3rd party logistics service provider (3PL). The 3PL service provider takes care of appointment time when his transport equipment has to be docked at supplier site for loading of goods. Then the 3PL takes care of the route through which it’s equipment will travel to the manufacturer site. 3PL service provider then delivers goods to manufacturer site.

Supplier management

Supplier management deals with ensuring long term supply of goods of desired quantities at desired intervals of time and at desired costs. Generally there will be more than one supplier for any specific goods and customer may divide his total requirement so that certain percentage of his requirement is met by each supplier. Once a relationship is made with a supplier then periodic transactions for purchase orders, shipments, goods received etc. are captured on daily basis. Reports for supplier performance are made for price compliance, delivery compliance, lead time compliance etc.

There are some other areas like purchasing and sourcing are also linked with supplier management.

Some of the latest technologies used in supplier management, purchasing an sourcing include common market place functionality, Vendor Managed Inventory (VMI), Automatic Replenishment, vendor ranking, Just-in-time replenishment, Kanban replenishment etc.