Meaning, Objectives, Functions, Participants of Supply Chain

In commerce, supply chain management (SCM), the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfillment from point of origin to point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

Supply-chain management has been defined as the “design, planning, execution, control, and monitoring of supply-chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.”

SCM practice draws heavily from the areas of industrial engineering, systems engineering, operations management, logistics, procurement, information technology, and marketing and strives for an integrated approach. Marketing channels play an important role in supply-chain management.

Current research in supply-chain management is concerned with topics related to sustainability and risk management, among others. Some suggest that the “people dimension” of SCM, ethical issues, internal integration, transparency/visibility, and human capital/talent management are topics that have, so far, been underrepresented on the research agenda.

Although it has the same goals as supply chain engineering, supply chain management is focused on a more traditional management and business based approach, whereas supply chain engineering is focused on a mathematical model based one.

The various objectives of Supply Chain Management which are also applicable for International Logistics and Supply Chain management.

1. To maximize overall value generated

The higher the supply chain profitability or surplus, the more successful is the supply chain.

The supply chain profitability is the difference between the amount paid by consumer to purchase the product and the cost incurred by organization to produce and supply the product to the customer at right time.

2. To look for Sources of Revenue and Cost

There is only one source of Revenue i.e. customer.

Appropriate management of the flow of information, product or funds is a key to supply chain success.

3. Replenishment of the Material or Product whenever required
4. Cost Quality Improvement
5. Shortening time to Order
6. Faster Speed to Market
7. To meet consumer demand for guaranteed delivery of high quality and low cost with minimal lead time.
8. Efficient supply chain
9. To achieve world class performance
10. More awareness of supply chain dynamics and efficiency
11. To fulfill customer demand through efficient resources
12. To optimise pre and post production inventory levels
13. Good understanding of business characteristics
14. Provide flexible planning and control mechanism
15. Reduce transportation cost
16. Greater labour efficiency, equipment and space efficiency
17. To maximize efficiency of distribution side
18. To reduce system wide cost of company to satisfy service level requirement

(Company costs: Manufacturing, Fixed assets, inventories, transportation)

(Service levels: Response time Hrs/day/week/month)

19. Helps in better decision

Functions

A supply chain includes all efforts pertaining to the production and delivery of a product/service from suppliers to customers. SCM includes:

• The management of demand and supply
• Raw materials and parts sourcing
• Manufacturing and/or assembly
• Warehousing
• Tracking inventory
• Order Management
• Distribution across multiple channels
• Delivery to the customer

Supply Chain Management plays a crucial role in the success of the enterprise and customer satisfaction. The knowledge of SCM can also be leveraged to support disaster relief operations, medical missions, and handle similar emergencies.

Any business needs resources to trade. Further, it uses these resources to create products/services which the consumers are willing to pay for. This is known as the ‘transformation process’.

Participants

Producers

Producers or manufacturers are organizations that make a product. This includes companies that are producers of raw materials and companies that are producers of finished goods. Producers of raw materials are organizations that mine for minerals, drill for oil and gas, and cut timber. It also includes organizations that farm the land, raise animals, or catch seafood. Producers of finished goods use the raw materials and sub-assemblies made by other producers to create their products.

Distributors

Distributors are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers. Distributors are also known as wholesalers. They typically sell to other businesses and they sell products in larger quantities that an individual consumer would usually buy. Distributors buffer the producers from fluctuations in product demand by stocking inventory and doing much of the sales work to find and service customers. For the customer, distributors fulfill the “Time and Place” function – they deliver products when and where the customer wants them.

Retailers

Retailers stock inventory and sell in smaller quantities to the general public. This organization also closely tracks the preferences and demands of the customers that it sells to. It advertises to its customers and often uses some combination of price, product selection, service, and convenience as the primary draw to attract customers for the products it sells. Discount department stores attract customers using price and wide product selection. Upscale specialty stores offer a unique line of products and high levels of service. Fast food restaurants use convenience and low prices as their draw.

Customers

Customers or consumers are any organization that purchase and use a product. A customer organization may be an organization that purchases a product in order to incorporate it into another product that they in turn sell to other customers. Or a customer may be the final end user of a product who buys the product in order to consume it.