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Supply Chain Management Services
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Supply Chain Management Services

More Than Logistics

Written by Malika Wadhwani

Supply chain management is not just about moving a product from one place to another. Today, it involves a lot more than merely logistics.

History of the Supply Chain

According to the National Science Foundation, the concept of “mass production” was first utilized by Ford in 1927. They used the mass production concept for manufacturing “Model A” cars and made it their goal to control every aspect of production. All of the raw materials required came only from Ford-owned mines and plantations through one single gate. This concept was followed for a number of years and started changing in the 1970s.

By the late 1970s, the Japanese car manufacturers adopted a different, leaner model that resulted in cheaper and higher quality cars. American car manufacturers thus faced stiff competition from the Japanese, who adopted more efficient manufacturing processes. In the 1980s, GM was the first American company to absorb the “lean” manufacturing method and appointed Morris Cohen, professor at the Wharton Business School, to restructure their manufacturing process.

Cohen recommended reorganizing GM’s repair parts supply chain and suggested they form a network of resources, suppliers of raw materials, components, and finished products. This approach proved to be an initial success in the manufacturing of GM’s new car—the Saturn.

Supply Chain Management

SCM has been defined as controlling the flow of information, products and services between the supplier, manufacturer, wholesaler and a customer. Its primary function is finding the raw materials, components or services a company needs to make a product or provide a service at the lowest possible cost.

The supply chain management (SCM) process could be categorized into five stages: forecasting and planning, procuring, product assembly, delivering and/or distribution, and warehousing. It is vital that Information Technology is utilized to support and coordinate these activities.

Forecasting and Planning

Developing a strategy to forecast and plan for a product’s demand can play a huge role in supply chain management. A supply chain company should be able to forecast demand of various goods based on its past experience, market demand and positioning, and the relationship it enjoys with its customers. Developing proper metrics for this will help the supply chain function efficiently and use cost effective measures to provide high value to its customers.

The use of metrics in proper planning and forecasting will substantially cut costs for the supply chain company and the supplier as it will curtail surplus and obsolescence. Another huge advantage of using information technology is to assist the manufacturer on planning how much to make or ship a product to satisfy its market demand.

Procuring

Manufacturers need to source the raw materials and parts required from different suppliers and distributors at the most cost-effective prices. They often outsource this procurement process to a supply chain management company that helps them save on resources, time, and ultimately money.

SCM companies work with several suppliers to provide them with goods and services they need for their customers or manufacturers. With their suppliers, they work out the pricing, delivery logistics, and payment process. This is done efficiently by using SCM software to help monitor these processes and manage inventory.

Product Assembly

When supply chain managers receive a product, at times it needs to be assembled before testing it out for quality and functionality. It is then packaged and prepared for delivery.

Delivering and/or Distribution

There are many logistics that need to be established. For example, where to coordinate orders received from customers, how to manage a network of warehouses, how to ship products through various carriers, how to ensure delivery to manufacturers and customers, and how to develop a system to issue invoices.

In addition to inventory, sourcing, and receiving, supply chain companies also help manufacturers’ manage warehousing, payment authorization and distribution to their customers.

Warehousing

Warehousing plays a crucial role in ensuring that supply chain management is effective and efficient. Some of the functions carried out in warehouses include branding, labeling, assembly, packaging, and kitting. The proper location of a warehouse depends upon proximity to major markets supplying products and services and manufacturers/customers.

Products and services are made available by keeping competition in mind. Strategies are developed to save on costs associated with transportation, facilities, equipment, workforce, etc. Supply chain companies also store many high demand products at their warehouse, as they may need to be shipped to the customer on an urgent basis. These products (e.g. airplane parts or industrial machinery parts) affect the efficiency and performance of their operation. Hence, several manufacturers prefer to have their supply chain companies in close proximity. Some even outsource their warehousing to a supply chain company who then manages everything for them.

Information Technology

Information technology is what helps maintain smooth day-to-day functioning of the various stages listed above. Utilizing SCM software, a company providing supply chain services can connect with their customers and suppliers.

These SCM tools help process orders, provide prices, status information, and give information on logistics of delivery, payment schedules, cost savings achieved etc. They assist in better coordination between the supply chain management company, the supplier, and the customer.

The ultimate goal of supply chain management is on time delivery of high quality goods at competitive prices to the customer. Additionally, by providing support services and improving asset utilization, an SCM company efficiently and effectively improves a company’s performance and bottom line results.

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