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Supply chain refers to all the facilities and processes used in supply of goods and services; from procurement of raw material, through manufacturing operations, up to delivery to final user, and supply chain management (SCM) refers to Management of all operations within a company impacting and interfacing other sections of the supply chain to improve entire supply chain performance.
The main functions and components of SCM include:
- Defining business boundaries and relationships
- Managing demand and supply
- Selling system interface
- Manufacturing system interface
- Product design interface
Defining business boundaries and relationships is at the core of all SCM initiatives. The most important of these business boundaries relates to the decisions on outsourcing. In addition to general concept of what to manufacture and process in-house, these boundaries also refer to the roles played by supplier and buyers in each other’s business decision and operational activities.
Demand management is managing the demand for goods and services along the supply chain. The basic demand is the demand for the ultimate product or service from the end user. To meet this demand of end user, different links in the supply chain need to supply some goods or service to the following link in the chain. In turn to meet their supply commitment they need inputs from the previous link.
Logistics refers to all the processes involved in storing, moving, transporting or in any other way handling material. Role of logistics in activities before start of material and after completion of manufacture up to transportation to the immediate customer has been well recognized in the past also. But the logistics cost and effectiveness is also affected by, and in turn affect all other activities along the supply chain.
Purchasing has the closest links with the supply side of the supply chain. It plays a key role in the total SCM functions. At strategic level, purchasing plays a decisive role in decisions on and implementation of business boundaries. It acts as a link between the vendors and the company to get involvement and help of vendors in matters like purchased material specification, matching of lot sizes and transportation packing.
Selling is the closest link with the demand side of the supply chain. It is directly responsible to help customer know, select, buy, pay for, and take away company’s product. These products may be sold to the customers directly or through a distribution network. Sales plays an important part in decision on design of the distribution and is directly involved in its day-to-day operations.
Manufacturing represents the core of internal operations of a company. No SCM policies, can operate in isolation from the manufacturing activities. Manufacturing supports SCM in many ways like, reducing manufacturing lead times and supplying material closely matched to customer lot size and time requirements.
Product design has significant impact on efficiency and effectiveness of both supply and demand side of supply chain. In addition the basic quality of the finished product sold to the end user can be improved substantially by better collaboration among channel partners.
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