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Introduction to Supply Chain Management

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  • Difficulty Level : Easy
  • Last Updated : 16 Jun, 2022
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A supply chain is like a network that provides facilities and options like distribution which performs operations like Procurement of material, the transformation of these materials to specific intermediates, and after that finished product and the distribution procedure starts which starts distributing respective products to customers. Following are some key points regarding the supply chain.

  • In the previous times, all the organizations like marketing, distribution, planning, manufacturing, and purchasing organizations work independently along the supply chain.
  • Organizations have their independent objectives which are sometimes conflicting also.
  • To work in an efficient manner there arises a need through which these different functions are able to integrate together.
  • Therefore, Supply chain management is a strategy that came into arising through which such integration can be achieved.

Flows in the supply chain:

Figure : Flow in supply chain

Flow resembles a chain reaction. In this, there is a flow of material from supplier to customer. Both supplier and customer share information. There is also a flow fund from customer to supplier. Supply Chain Management in Supply Network :

  • Supply chain management is responsible for the management and control flow of material, information, and finances in supply chains.
  • The task of Supply chain management is to design, plan, and execute activities at different stages so as to provide desired levels of service to supply chain customers profitably.

Examples of Supply Chain Management :

  • Dell
  • Toyota/ Volkswagen
  • McMaster Carr / W.W. Grainger, sell auto parts
  • Amazon
  • Frozen food industry/Fast food industry/5 star restaurants
  • Internet shopping

The main functions of Supply Chain Management include:

  1. Defining business boundaries and relationships: It is the most important of all SCM initiatives. It relates to the decision on outsourcing.
  2. Managing demand and supply: The basic demand is the demand for the ultimate product or service from the end-user. To meet these needs of the user, different links in the supply chain need to supply some goods or services. to the following link in the chain.
  3. Logistics: It refers to the processes involved in storing, moving, transporting, or handling material in any other way.
  4. Purchasing: It acts as a link between the vendors and the company to get involvement and help of vendors in matters like Purchase material specification, matching of lot sizes, and transportation packing.
  5. Selling system interface:  It is directly responsible to help customers know, select buy pay for and take away the company’s product
  6. Manufacturing system interface: It supports SCM by reducing manufacturing lead times and supplying material that closely matched customer lot size and time requirements.
  7. Product design interface: Basic quality of the product sold to the end-user can be improved substantially by better collaboration among channel partners.

Advantages of Supply chain management :

  1. Supply chain planning and collaboration – With SCM users can model his/her supply chain, set goals, and optimize and schedule time. It enables users to maximize returns on assets and ensures a profitable match of supply and demand.
  2. Supply chain execution – It enables users to carry out supply chain planning and generate high efficiency at the lowest possible costs.
  3. Supply chain visibility design and analytics – SCM gives users network-wide visibility across your extended supply chain to perform strategic and as well as day-to-day planning.
  4. Business benefits – It allows its users to transform a traditional linear supply into an adaptive network with the following benefits :
    • Faster response to changes in supply and demand
    • Increased customer satisfaction
    • Compliance with regulatory requirements
    • Improved cash flow
    • Higher margins
    • Greater synchronization with business priorities
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