Supply chain management refers to the oversight of various processes at work on a supply chain. Supply chains vary greatly in complexity depending on the size and scope of a business. Supply chain management seeks to maintain maximum efficiency of the movement of goods along a supply chain, while keeping costs as low as possible.
There are a number of basic elements that keep the supply chain functioning properly. At the top of chain is the customer. When items are purchased by the customer, the sales department of the business puts in an order for the appropriate number of goods. When a supply chain has received orders, there is planning involved to manufacture the goods. The necessary raw materials to create the goods are ordered from suppliers. Products for multiple orders are produced simultaneously for greater efficiency.
The inventory department of the supply chain receives and inspects incoming raw materials. They then ship these off to the production department that begins to build the goods. The finished products are tested by for quality and safety. The goods are then delivered to the customer. An invoice is sent to the customer for payment.
Supply Chain Management Modes of Operation
Supply chain management guides this process using three modes of operation: strategic, tactical, and operational. At the strategic level, companies make decisions regarding the supply chain that are in keeping with the overall strategy of the organization. Management has to make strategic decisions on product design, manufacturing, the customer, supplies, and transportation. Companies have to decide how to develop and expand their product offering. They make decisions on when they want to produce new models of a particular product, or whether they want to develop a whole new line.
A tactical supply chain management introduction requires knowledge of the cost-savings requirements of businesses. Tactical supply chain management deals with implementing techniques that will save the company money along a supply chain. This often means forming special deals with certain suppliers, lowering the cost of product storage, or finding cheaper rates for transportation. Tactical managers make the decision on which new technology will be implemented to run the supply chain more efficiently and cost-effective.
An operational supply chain management introduction requires knowledge of day-to-day functions of a supply chain. Operational supply chain management involves making decisions on how products move along a supply chain. Operational managers are responsible for overseeing production schedules, warehouse product flow, contracts with suppliers, and the customer ordering process. The day-to-day problems that arise along a supply chain are dealt with via operational management.
Supply chain management is a very big job that calls for different types of management techniques to work together. There are many risks associated with supply chain management. Large companies invest millions of dollars to ensure that their supply chain runs effectively with limited risk. To fully comprehend a supply chain management, these fundamentals are essential to grasp.
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