BASICS OF SUPPLY CHAIN
Supply chain: consists of all parties
involved, directly or indirectly in the procurement of a product or raw
material.
Supply Chain Management: the
management of information flows between and among stages in a supply chain to maximize
total supply chain effectiveness and profitability
The supply chain
has three main links:
1.
Materials flow from
suppliers and their "upstream" suppliers at all levels
2. Transformation of
materials into semi-finished products, or the organization’s own production
processes
3.
Distribution of products
to customers and their downstream customers at all levels
Figure
1: A typical supply chain
INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN
Information technology’s primary role in SCM is creating the integration or tight process and information linkages between functions within
a firm such as marketing, sales, finance, manufacturing, and distribution – and
between firms, which allow the smooth, synchronized flow of both information
and product between customers, suppliers and transportation providers across
the supply chain.
Figure 2: The five basic
supply chain management components.
The five basic
supply chain management components:
1. Plan
|
·
It is the strategic portion of supply chain
management.
·
A company must have a plan for managing all
the resources that go toward meeting customer demand for products/ services.
·
A big piece of planning is developing a set
of metrics to monitor the supply chain so that it is efficient, less cost and
deliver high quality and value to customer.
|
2. Source
|
·
Companies must carefully choose reliable
suppliers that will deliver goods and services required for making products.
·
Companies must also develop a set of pricing,
delivery and payment processes with suppliers and create metrics for
monitoring and improving the relationship.
|
3. Make
|
·
This is step where companies manufacture
their products/ services.
·
This can include scheduling that activity
necessary for production, testing, packaging and preparing for delivery.
·
This is by far the most metric-intensive
portion of the supply chain, measuring quality levels, and production output
and worker productivity.
|
4. Delivery
|
·
This step is commonly referred as logistics.
·
Logistics: the set of processes that plans
for and control the efficient and effective transportation and storage of
supplies from suppliers to customers.
·
During this step, the companies must be
able to receive orders from customers, fulfill orders via a network of
warehouse, pick transportation companies to deliver the products and
implement a billing and invoicing system to facilitate payments.
|
5. Return
|
·
It is the most problematic steps.
·
The companies must create a network for
receiving detective and excess products and support customers who have
problems will deliver products.
|
Figure 3: The integrated
supply chain
Factors driving supply chain management
1. VISIBILITY
· Supply
Chain Visibility:
the ability to view all areas up and down
the supply chain. Changing supply chains requires a comprehensive strategy
buoyed by information technology. Organizations can use technology tools that
help them integrate upstream and downstream, with both customers and suppliers.
·
The
bullwhip
effect occurs when distorted product demand
information passes from one entity to the next throughout the supply chain.
2. CUSTOMER
BEHAVIOR
· The behavior of
customers has changed the way businesses complete. Customers will leave if a
company does not continually meet their expectations. They are more demanding
because they have information readily available, they know exactly what they
want, and they know when and how they want it.
· Demand
planning software generates demand forecasts using statistical tools and
forecasting techniques.
· Companies can respond
faster and more effectively to consumer demands through supply chain
enhancements such as demand planning software.
· Once an organization
understands customer demand and its effect on the supply chain it can begin to
estimate the impact that its supply chain will have on its customers and
ultimately the organization’s performance.
3. COMPETITION
SCM software can be
dividing into:
i.
Supply
chain planning (SCP) software uses advanced mathematical algorithms to improve the flow
and efficiency of the supply chain while reducing inventory. SCP depends
entirely on information for its accuracy.
ii. Supply
chain execution (SCE) software automates the different steps and stages of the supply
chain. This could be as simple as electronically routing orders from a
manufacturer to a supplier.
v Both of the will increase a company’s ability to compete
Figure 4: Supply chain
planning and supply chain execution software’s correlation to the supply
4.
SPEED
· These systems raise the
accuracy, frequency and speed of communication between suppliers and customers,
as well as between internal users.
· Another aspect of speed
is the company’s ability to satisfy continually changing customer requirements
efficiently, accurately and quickly
·
Timely and accurate
information is more critical to business than ever before.
Figure 5: Factors fostering speed
SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS
· To succeed in today’s
competitive markets, companies must align their supply chain with the demands
of the markets they serve.
· Supply chain performance
is now a distinct competitive advantage for companies proficient in the SCM area.
Figure 6: Seven
principles of SCM
The following are
keys to SCM success:
i.
MAKE THE SALE TO
SUPPLIERS
The hardest part of any SCM system is its complexity because
a large part of the system extends beyond the company’s walls. Not only will the
people in the organization need to change the way they work, but also the
people from each supplier that is added to the network must change. Be sure
suppliers are on board with the benefits that the SCM system will provide.
ii.
WEAN EMPLOYEES OFF
TRADITIONAL BUSINESS PRACTICES
Operations people typically deal with phone calls, faxes and
orders scrawled on paper and will most likely want to keep it that way.
Unfortunately, an organization cannot disconnect the telephones and fax
machines just because it is implementing a supply chain management system. If
the organization cannot convince people that using the software will be worth
their time, they will easily find ways to work around it, which will quickly
decrease the changes of success for the SCM system.
iii.
ENSURE THE SCM SYSTEM
SUPPORTS THE ORGANIZATION GOALS
It is important to select SCM software that gives
organizations an advantage in the areas most crucial to their business success.
If the organizational goals support highly efficient strategies, be sure the
supply chain design has the same goals.
iv. DEPLOY IN INCREMENTAL
PHASE AND MEASURE AND COMMUNICATE SUCCESS
Design the development of the SCM system in incremental
phases. For instance, instead of installing a complete supply chain management
system across the company and all suppliers at once, start by getting it
working with a few key suppliers, and then move on to the other suppliers.
Along the way, make sure each step is adding value through improvements in the
supply chain’s performance. While a big-picture perspective is vital to SCM
success, the incremental approach means the SCM system should be implemented in
digestible bites and also measured for success one step at a time.
v.
BE FUTURE ORIENTED
The supply chain design must anticipate the future state of
the business. Because the SCM system likely will last for many more years than
originally planned, managers need to explore how flexible the systems will be
when (not if) changes are required in the future. The key is to be certain that
the software will meet future needs, not only current needs.
I THINK THAT’S ALL FROM THIS CHAPTER…STUDY WELL DEAR…
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