Supply chain management is a process in which an organization identifies, plans, and executes the movement of goods from raw material to finished products. The goal of this process is to provide customers with products they want at a time when they want them, where they want them. A supply chain management system can also be thought of as a network that includes all the players involved in delivering the right product at the right time and place.
Functions of a Supply Chain Management System
The functions of a supply chain management system are to ensure effective coordination between the various business activities involved in order to achieve the organizational goal, specifically customer satisfaction. In GrowwithSupplychain, the basic steps for planning and executing each process are below:
Scheduling
Scheduling is the first step in any supply chain management system. Scheduling involves deciding which product gets produced, how many of each to make, and when they should be ready to ship.
Automated scheduling systems try to forecast demand for products by considering the quantities that have been ordered already, along with upcoming orders. Then they create a production schedule based on these forecasts. If they are accurate, the company will have just enough products on hand to meet demand.
However, if there is an error in the forecast, it may overproduce some items while leaving other items on backorder. These systems can also help with ideas for more efficient manufacturing processes that reduce waste and save money.
Maintaining Inventory
Inventory refers to the number of products that are available for sale at any given time. It includes not only the finished goods ready for shipment but also all of the parts and materials which go into making those goods. Inventory levels must be maintained so that the company has enough products to meet customer demand, but not so much that it wastes time and money storing unneeded items.
Procurement
Procurement is the process of acquiring materials for manufacturing products. It includes soliciting bids from suppliers, evaluating prices, signing contracts, and making payments when necessary. The goal of procurement is to ensure that materials are delivered when they are needed in production, but not when they are needed to meet customer demand.
Production
Production is the process of actually making products according to the schedule created in step 1. This can include processing raw materials into finished goods, creating components for other items, or assembling items out of parts and materials that have already been manufactured.
Distribution
Distribution involves getting products from the production facility to the final destination. This can involve moving products by truck, ship, or airplane to a retail store, warehouse, or another facility that is not located on the production site. The distribution also includes tracking shipments and making sure that they arrive on time.
The Advantages of Supply Chain Management Systems
A supply chain management system can help companies increase their efficiency, decrease costs, and better manage risks. By forecasting demand more accurately, they can produce just the right amount of products to meet demand.
They can also improve manufacturing processes to eliminate waste and reduce expenses. Finally, companies can minimize risk by decreasing the time it takes to identify problems with the supply chain, for example, if a shipment is not arriving on time.
Summary
The overall goal of any supply chain management system is to ensure that there are enough products on hand for customers to buy. This includes having the right number of each type, as well as the right amount of time before they will need to be replaced or restocked. The various steps in a supply chain management system are designed to support this goal.