A large set of activities besides purchasing is part of supply chain management. Each of these seemingly diverse activities has one important feature in common: they are part of a net work that will define how efficiently and effectively goods and information flow across a supply chain. While the need to perform supply chain-related activities has been present for many years, it is an organization’s willingness to align, coordinate, integrate, and synchronize these activities and flows that is relatively new. What are the activities that are part of this concept called supply chain management.
Purchasing Most organizations include purchasing as a major supply chain activity. Since purchasing is the central focus of this book there is no need to provide more detail here.
Inbound Transportation Larger organizations usually have a specialized traffic and transportation function to manage the physical and informational links between the supplier and the buyer. For some organizations, transportation is the single largest category of supply chain costs, especially for highly diversified organizations. While a firm may have minimal common purchase requirements between its operating units, opportunities usually exist to coordinate the purchase of transportation services.
Quality Control Quality control has taken on increased importance during the last 15 years. Almost all organizations recognize the importance of supplier quality and the need to prevent rather than simply detect quality problems. The emphasis has shifted from detecting defects at the time of receipt or use to prevention early in the materials-sourcing process. Progressive organizations work directly with suppliers to develop proper quality control procedures and processes.
Demand and Supply Planning Demand planning identifies all the claims (or demand) on output. This includes forecasts of anticipated demand, inventory adjustments, orders taken but not filled, and spare part and after-market requirements. Supply planning is the process of taking demand data and developing a supply, production, and logistics network capable of satisfying demand requirements.
Receiving, Materials Handling, and Storage All inbound material must be physically received as it moves from a supplier to a purchaser. In a non-JIT environment, material must also be stored or staged. Receiving, materials handling, and storage are usually part of the materials management function because of the need to control the physical processing and handling of inventory.
Material or Inventory Control The terms material control and inventory control are sometimes used interchangeably. Within some organizations, however, however, these terms have different meanings. The material control group is often responsible for managing material releases to suppliers. This includes generating the release, contacting a supplier directly concerning changes, and monitoring the status of inbound shipments. Material control activities are sometimes the responsibility of the purchasing department, particularly in smaller organizations.
The inventory control group is often responsible for determining the inventory level of finished goods required to support customer requirements, which emphasizes the physical distribution(i.e., outbound or downstream) side of the supply chain. Integrated supply chain management requires that the material and inventory control groups coordinate their efforts to ensure a smooth and uninterrupted flow to customers.
Order Processing Order processing helps ensure that customers receive material when and where they require it. Problems with order processing have involved accepting orders before determining if adequate production capacity is available, not coordinating order processing with order scheduling, and using internal production is an important part of supply chain management: it represents a link between the producer and the external customer.
Production Planning, Scheduling, and Control These activities involve determining a time-phased schedule of production, developing short-term production schedules, and controlling work-in-process production. The production plan often relies on forecasts from marketing to estimate the volume of materials that are required over the near term. Because operations is responsible for carrying out the production plan and meeting customer order due dates, order processing, production planning, and operations must work together closely.
Warehousing/Distribution Before a product heads to the customer, it may be stored for a period in a warehouse or distribution center. This is particularly true for companies that produce according to a forecast in anticipation of future sales. Increasingly, as companies make a product only after receiving a customer order, this part of the supply chain may become less important.
Shipping This activity involves physically getting a product ready for distribution to the customer. This requires packing to prevent damage, completing any special labeling requirements, completing the required shipping documents, or arranging transportation with an approved carrier. For obvious reasons, shipping and outbound transportation must work together closely.
Outbound Transportation Fewer organizations “own” the transportation link to their customers than was the case just a few years ago. Increasingly, full-service transportation providers are designing and managing entire distribution networks for their clients.
Customer Service Customer service includes a wide set of activities that attempt to keep a customer satisfied with a product or service. The three primary elements of customer service include pre-transaction, transaction, and post-transaction activities.