When a manufacturer undertakes to produce goods or services for onward sales to a customer, it requires to procure the raw materials required at each stage of manufacture, process them, and then finally arrange to deliver the finished product to the customer. It will also have to deal with the return of defective material. The handling of the entire production flow from raw components to final delivery is called supply chain management.
Efficiency
Traditionally, supply chain management requires proper planning of all the resources that are needed to meet the demands of the customer for any product or service. Once this chain is established it needs to be monitored constantly for efficiency, effectiveness and value that are in line with the goals of the company. The management requires sourcing and choosing the right suppliers for any of the raw materials or services, and managing and monitoring relationships with chosen suppliers. Processes must include ordering of the correct material, receiving it, managing inventories and the authorization of payments to suppliers.
Organization
Supply chain management will also require organizing the activities to accept materials of the right quality, sending them onwards to manufacturing sections when they are needed, manufacturing the product, assuring its quality, and then packaging it for delivery as per a schedule. It will also require coordinating the orders from customers, dispatching the products to them, creating the necessary invoices and also receiving payments. It is also necessary to set up a system to process defective products, and also one to dispose of excess raw materials or other products that are not wanted.
Cross Organization Support
Throughout the supply chain management process all information needed for supporting various activities must be monitored and it must be ensured that regulations in force are always complied with. Processes can require the enabling of finance, human resources, facilities management, information technology, product design, quality assurance, sales and portfolio management.
Cost and Waste Reduction
Effective management of supply chains helps an organization to reduce costs, control waste, and reduce time in production cycles. It helps to arrange for the required inputs at every stage of the manufacturing process on a just in time basis. Retail sales automatically act to signal the need for replenishment to the manufacturers, so that their shelves are restocked as the product is sold. A similar automatic replacement of inventory of raw material required for production is enabled by the constant analysis of the movement of material from stores.
Inventory Management
Supply chain management has become so complex and wide-ranging, that it has become necessary to use information technology and software to optimize the performance of the supply chain. This software helps in timely supply, accurate information at each stage of the supply chain, and monitoring sales. This enables manufacturers to produce only that which is being sold, reduces inventory, and helps in lowering the cost of manufacturing and dispatching goods and services. Software with artificial intelligence helps it to learn from fluctuating production to help in anticipating any need for changes to the supply chain.
The supply chain of any business is what its consumers and customers see. So, the more effective a supply chain is managed, the better will be its business reputation, and its ability to sustain the business in the long-term.
