The basics of the Supply Chain

Today most supply chains are a connected group of ad hoc and fragmented processes aligned to the supply and support of customer value. Errors and inadequacies in each process of this alignment cumulate to an overall inefficiency for the supply chain participants and the end customer.

Most product supply chains contain on average twice the inventory needed to provide competitive service levels. The processes also suffer stop start cycles, due to information and planning inadequacies that prevent a seamless flow of goods and services to the next process in the chain.

In the emerging field of supply chain management, information is focused on as the key to aligning, integrating, informing and gearing preceding and follow on processes in order to maximize overall supply chain efficiencies. To manage this complex set of relationships in support of customer satisfaction and profitability a business must be capable of requiring effective management and coordination of information, materials and finance at all stages of the supply process. For each the following are important:

• For Information the business must have access to precise customer requirements and demand forecasts, effective order and error information transmission plus the dispatch, progress and delivery status of the product of each process in the chain.

• For material flows information and payments in support of the requested activities must be supplied in a manner designed to allow supply production and any re-tooling required. Equally it is increasingly critical for any process supplier to be able to manage reverse material flows (product returns), product servicing, recycling of returns or increasingly packaging and disposal of the goods once the consumer has finished with them.

• Financial information in relation to credit terms, terms of payment, means and method of payment, discounts, incentives, consignment and title ownership plus variable factors such as responsibility for duties and taxes in relation to cross border trading are critical to the effective management of the supply chain.

Advances in applications and supply chain theory are providing the capabilities for supply chains to maximize efficiencies and increase participant asset use and profitability. However the gains available are not just in asset use and profitability. Service levels, product and process quality, time and overall satisfaction are key drivers in the implementation of supply chain management

INTRODUCTION of Supply Chain Management (SCM)

Supply Chain Management (SCM) is about managing the flow of materials, information & finance as they move in a process from supplier trough production, distribution and delivery of finished product to wholesaler and retailer and ultimately to the consumer, furthermore it often includes after-sales service and returns or recycling.

Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed).

Flows in supply chain management can be divided into three main flows:

• Product flow

Includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs.

• Information flow

Involves transmitting orders and updating the status of delivery

• Finances flow

consists of credit terms, payment schedules, and consignment and title ownership arrangements

Effective supply chain management demands comprehensive information systems allow the company to synchronize plans with customers and suppliers, collaborate in real time both inside and outside the enterprise, execute plans, adapt to a dynamic environment, and measure performance to objectives.

A recent study in the United States showed that the application of Supply Chain Management tools can result in the following benefits to a company as follow:

• 50% Reduction in inventory
• 40% Improvement in on-time delivery
• 27% reduction in order cycle time
• Nine fold reduction in out-of-stock-rates.

As the result, SCM leads an organization to provide a better service at a lower cost.