supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the production, delivery, and sale of a product to the consumer. The supply chain is typically made up of multiple companies who coordinate activities to set themselves apart from the competition. A supply chain has three key parts:
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Supply focuses on the raw materials supplied to manufacturing, including how, when, and from what location. Manufacturing focuses on converting these raw materials into finished products. Distribution focuses on ensuring these products reach the consumers through an organized network of distributors, warehouses, and retailers.
Another term associated with a supply chain is supply chain management (SCM), which is the oversight of materials, information, and finances as they are distributed from supplier to consumer. The supply chain also includes all the necessary stops between the supplier and the consumer. Supply chain management involves coordinating this flow of materials within a company and to the end consumer. Supply chain management can be divided into three main flows:
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The Product flow includes moving goods from supplier to consumer, as well as dealing with customer service needs. The Information flow includes order information and delivery status. The Financial flow includes payment schedules, credit terms, and additional arrangements.
Supply chain management (SCM) is the process ofplanning, organizing, implementing, and controlling the operations of the supply chain for the purposeofsatisfyingthe customers¶ ne eds as efficiently as possible. SCM isresponsible for all the storage and movements of raw materials, work -inprocessinventory, and finished goods inventory from point of origin to point ofconsumption.A supply chain network of anorganization includes the l ocation as well as movement decisions in respect ofprocurement of raw materials and other inputs, transformation of thesematerials into intermediate and finished products, and the distribution ofthese finished products to customers. With effective and efficient Supply ChainManagement (SCM) company can improve the way it finds the raw components itneeds to make a product or service and deliver it to customers. SCM issignificant for both service and manufacturing organizations, although thecomplexity of the c hain may vary greatly from industry to industry.Supply chain managementincludes five basic activities: planning and strategy formulation, sourcing,transformation process, delivery, and at last handling customer complaints andexcess stocks.
Planning and strategy formulation: Company needs a strategy formanaging all the resources that go toward meeting customer demands. Supplychain planning is carried out at corporate level as well as at operation level.Strategy formulated at corporate level is for lon g term horizon and includesdecision on main objectives of supply chain in terms of customer service,formulating policies, designing supply chain, strategic alliances, etc.Operational level planning is for short term, and focuses on activities over aday -to-day basis. The effort is to effectively and efficiently manage theproduct flow in order to fulfill the strategic goals. Sourcing: First generate the list ofsuppliers supplying the required inputs, evaluate each of them on the basis ofrelevant criterion as price, quality, delivery time, etc. Now choose the bestsupplier. Develop a set of pricing, delivery and payment processes withsuppliers and make efforts for monitoring and improving the relationships. Alsomake sure the proper
management of inventory of goo ds and services receivedfrom suppliers, including receiving shipments, verifying them, moving them tomanufacturing facilities and authorizing supplier payments. Transformation process: It includes Scheduling the activities necessary for production, testing, packaging and preparation for delivery and also ensuring the smooth production, high quality levels and improved worker productivity. Delivery:This part of supply chain is many times referred as logistics by many companies. It includes coordinating the receipt of orders from customers, developing a network of warehouses, arranging for pick carriers to move products to customers and setting up an invoicing system to receive payments.
Handling customer complaints and excess stocks: This part of suppl y chain deal with the problems that originate while carrying out the above activities like receiving defective and excess products back from customers, Wrong order placement, delay in receiving goods, conflicts with suppliers, etc. Integration of Supply Chain Activities Traditionally, planning, purchasing organizations, manufacturing, marketing and distribution along the supply chain is operated independently. These activities are carried out by different departments or organizations and each have their own objectives and these are often conflicting. For example, Marketing's objective of high customer service and maximizing sales revenue conflict with manufacturing and distribution goals. Many manufacturing operations are designed to achieve lower costs with small consideration for distribution capabilities and inventory levels. Such conflict makes it necessary to integrate all the functions of supply chain network. Coordination between these functional organizations in the chain is a key to attain a balanced supply chain network Major Supply Chain Decisions:There are four major decision are as related to supply chain management: location, production, inventory, and transportation. Location Deciding on the location of manufacturing facilities, st orage points, and sourcing points is first step in creating a supply chain. These should be taken carefully with due consideration of the long term plans of the organization. The location of facilities further guide management about how to reach customer market also it has a great impact on revenue, cost, and level of service. These decisions are normally based some of these factors: proximity to raw material source or customer market, production costs, taxes, tariffs, duties and duty drawback, transporta tion costs, production limitations, etc. Productio Decisions like what to produce, capacity of plant, production scheduling, equipment maintenance, workload balancing, quality control, etc. These decisions also have a great impact on the revenues, costs and customer service levels of the firm. Inventory:Inventory includes raw material, semi-finished and finished goods. They can be in-process between locations. The primary purpose is to buffer against any uncertainty that might be in the supply chain. De cision relating to inventory should consider carrying/holding cost, ordering cost, and opportunity cost. As inventory cost constitutes the big part of the total cost, it is critical
decision in supply chain operation. It also includes the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are vital as they are primary determinants of customer service levels. Transportation: These decisions are closely linked to the inventory decisions, as the decision are based on trade -off between cost involved using the particular mode of transportation and the indirect cost of inventory associated with that mode. For example air shipments may be fast, reliable, and requires lesser safety stocks, they are expensive. While other modes like rail and road are though less costly but requires maintaining high level of safety stock due to high level of uncertainty involved. Also the customer service levels and geographic location influence such decisions.
Objectives Greater efficiency, lower costs Enhance flexibility, agility Improve customer service Optimize the value chain The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer s request. For most commercial supply chains, value will be strongly correlated with supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain. For example, a customer purchasing a computer from Dell pays $2,000, which represents the revenue the supply chain receives. Dell and other stages of the supply chain incur costs to convey information, produce components, store them, transport them, transfer funds, and so on. The difference between the $2,000 that the customer paid and the sum of all costs incurred by the supply chain to produce and distribute the computer represents the supply chain profitability. Supply chain profitability is the total profit to be shared across all supply chain stages. The higher the supply chain profitability, the more successful the supply chain. Supply chain success should be measured in terms of supply chain profitability and not in terms of the profits at an individual stage. Having defined the success of a supply chain in terms of supply chain profitability, the next logical step is to look for sources of revenue and cost. For any supply chain, there is only one source of revenue: the customer. At Wal-Mart, a customer purchasing detergent is the only one providing positive cash flow for the supply chain. All other cash flows are simply fund exchanges that occur within the supply chain given that different stages have different owners. When Wal-Mart pays its supplier, it is taking a portion of the funds the customer provides and passing that money on to the supplier. All flows of information, product, or funds generate costs within the supply chain. Thus, the appropriate management of these flows is a key to supply chain
success. Supply chain management involves the management of flows between and among stage sin a supply chain to maximize total supply chain profitability.
Supply chain planning: Planning sets directions for the entreprise
-Procurement :( Establishing what needs to be purchased, selecting suppliers & managing relations with them, reducing costs, improving possibly raw material...) -Inventory management: (Managing levels of inventory in order to satisfy internal and external customers demand....) -Packaging (Ensuring correct package design in order to encourage the recycling of packaging and reducing packages costs ) -Faicility design (This includes insuring the best design that suits the internal or external customers. Here we are concerned with the issue such as : Size, Lightning, facilities, equipment , safety and security) -Wharehousing ( This includes stock management , efficient facility operations , layouts for effective transportation, safety, storage methods and equipment) -Transportation (This includes transportation modes, costs, transportation management, terminal utilisation, and in-transit care of goods) -Reverse logistics (The reduction where possible of product errors so that reverse logistics may be reduced...) -Logistics Systems: ( This includes decision suport systems , technology and software) -Customer service and marketing: This includes customer relationships, cusomer solicitation and retention and issues pertaining to the marketing mix variables.
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.[2]
Contents
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1 Overview 2 Supply chain modeling 3 Supply chain management 4 Standardization o 4.1 Nomeclature, classification and codification 5 See also 6 References 7 External links
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The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as follows: ³Supply 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 dri es coordination of processes and acti ities wit and across marketing, sales, product design, finance and information technology.´ A typical supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing si e and ever more remote geographical locations, and finally reaching the consumer. Many of the exchanges encountered in the supply chain will therefore be between different companies that will seek to maximi e their revenue within their sphere of interest, but may have little or no knowledge or interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organi ing network of businesses that cooperates to provide product and service offerings has been called the Ext d d Ent r ri .[ it tion needed]
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A diagram of a supply chain. The black arrow represents the flow of materi ls and a information and the gray arrow represents the flow of information and backhauls. The elements are (a) the initial supplier, (b) a supplier, (c) a manufacturer, (d) a customer, (e) the final customer. There are a variety of supply chain models, which address both the upstream and downstream sides. However the SC R model is most common. The SC R Supply-Chain Operations Reference model, developed by the Supply Chain Council, measures total supply chain performance. It is a process reference model for supply-chain management, spanning from the supplier's supplier to the customer's customer.[ ] It includes delivery and order fulfillment performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supp ly chain. The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework[ ] is built on eight key business processes that are both cross functional and cross-firm in nature. Each process is managed by a cross-functional team, including representatives from logistics, production, purchasing, finance, marketing and research and development. While each process will interface with key customers and suppliers, the customer relationship management and supplier relationship management processes form the critical linkages in the supply chain. The American Productivity & Quality Center (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organi ations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member companies as an open standard to
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facilitate improvement through process management and benchmar ing, regardless of k industry, si e, or geography. The PCF organi es operating and management processes into 2 enterprise level categories, including process groups and over ,000 processes and associated activities.
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A German paper factory receives its daily supply of raw material
tons of recyclable paper as its
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In the 980s, the term Supply Chain Management (SCM) was developed[ ] to express the need to integrate the key business processes, from end user through original suppliers. Original suppliers being those that provide products, services and information that add value for customers and other stakeholders. The basic idea behind the SCM is that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations and producti n o capabilities. If all relevant information is accessible to any relevant company, every company in the supply chain has the possibility to and can seek to help optimi ing the entire l supply chain rather than sub optimi e based on a local interest. This wi l lead to better planned overall production and distribution which can cut costs and give a more attractive final product leading to better sales and better overall results for the companies involved. Incorporating SCM successfully leads to a new kind of competition on the global market where competition is no longer of the company versus company form but rather takes on a supply chain versus supply chain form.