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Meaning of Supply Chain

The term supply chain refers to the linkages between suppliers, manufacturers and customers. Supply chains involve all activities like procurement of material, conversion of raw materials into finished goods, and logistics.

Supply chain management is defined as the process of planning, implementing, and controlling the supply chain operations. Planning and control of supply chains are important components of its management.

Supply chain encompasses all movement procurement of raw materials, transportation of raw materials  to store, storage of raw materials, issuing to plant ,work-in-process, inventory management, transferring to finished goods department , loading to outbound logistic , transferring goods to distributor, ensuring to reach to retailer , and in hands of customer, means  from point-of-origin to point-of- consumption management.

In broad sense supply chain includes product development, procurement of material, inbound transportation logistics to store, Conversion to finished goods, outbound transportation to distributors, seeking feedback from customers, and measuring performance.

It is a cross-functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end customer, who need to be satisfied efficiently-

Naturally, management of supply chains include closely working with channel partners — suppliers, intermediaries, outsourcing and other service providers and customers.

Technological changes and reduction in information communication costs with increase in its speed has led to changes in coordination among the members of the supply chain network.

Company must rely on the chain to successfully compete in the global market.

Modern organizations are striving to focus on core competencies and reduce their ownership of sources of raw materials and distribution channels. These functions can be outsourced to other business organizations that specialize in those activities and can perform in better and cost effective manner. In away organizations in the supply chain do tasks according to their core-competencies. Working in the supply chain improves organizational core competencies.


Steps in Implementing Supply Chain Management System

A successful implementation of supply management system requires integrating all activities into key supply chain processes. Implementation of supply chain includes collaborative work between buyers, suppliers, and customers. All of them need to share information. Network of information is most important in implementation supply chain management system. All partners need to link together to share information through electronic data interchange and take decisions in timely manner.

Implementing and successfully running supply chain management system will involve:

  1. Product Development
  2. Procurement
  3. Manufacturing
  4. Distribution Physical
  5. Outsourcing
  6. Services to Customer
  7. Measurement of performance

Step 1.Product Development

Customers and suppliers must work together in the product development process. Right from the start the partners will have knowledge of all the products. Involving all partners will help in shortening the life cycles. Products are developed and launched in shorter time and help organizations to remain competitive.

Step 2 Procurement

Procurement requires a careful resource planning, quality issues, identifying sources, negotiation, order placement, inbound transportation and storage. Organizations have to coordinate with suppliers in scheduling without interruptions. Suppliers are involved in planning the manufacturing process.

Step 3 Manufacturing

Flexible manufacturing processes must be in place to respond to market changes. They should be adaptive to accommodate customization and changes in the taste and preferences. Manufacturing should be done on the basis of just-in-time (JIT) and minimum lot sizes. Changes in the manufacturing process be made to reduce manufacturing cycle.

Step 4 Distribution physically

Delivery of final products to customers is the last position in a marketing channel. Availability of the products at the right place at right time is important for each channel participant. Through physical distribution processes serving the customer become an integral part of marketing. Thus, supply chain management links a marketing channel with customers.

Step 5 Outsourcing

Outsourcing is not limited to the procurement of materials and components, but also includes outsourcing of services that traditionally have been provided within an organization. The company will be able to focus on those activities where it has competency and everything else will be out sourced.

Step 6 Service to customers

Company through interfaces with the distributor, develop relationship with distributor. Through distributor, company develops relationship with customers. Distributors  work with customer and they have full knowledge of customers demand and aspirations .company cannot understand pulse of customers without help of distributors or dealers .company and distributors determine mutually satisfying goals, establish and maintain relationships. This provides positive feelings in the organization for distributors and for the customers.

Step 7 Measurement of Performance

Performance is measured in different parameters such as costs, customer service, productivity and quality.

There is a strong relationship between the supplier, customer and organization. Supplier capabilities and customer relationships can be correlated with a firm performance.

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