Although there are many views of supply chain management (SCM), at present, many practitioners look upon SCM as the management of key business processes across the network of organizations that form the supply chain. A supply chain is a network of manufacturers, suppliers, distributors, transporters, storage facilities and retailers that perform functions like procurement and acquisition of material, processing and transformation of the material into intermediate and finished tangible goods, and finally, the physical distribution of the finished goods to intermediate or final customers.
According to the definition given by the Global Supply Chain Forum, supply chain management is the integration of key business processes from end-user,to original suppliers that provides products, services, and information that add value for customers and other stakeholders. There are eight business processes that are carried out across the supply chain. They are:
- Customer Relationship Management: Customer relationship management involves establishing a framework for building and maintaining relationships with customers. This involves identifying the customer-groups who form the target for achieving the firm’s business objectives. Then the customer service teams design the product or service agreements specifying the level of service that is to be offered to each of these customer groups. These teams work in close coordination with the key account customers to reduce demand variability. Performance reports are designed in order to measure levels of service made available to the customer and the profits resulting from serving each of the customer groups.
- Customer Service Management: Customer service management is concerned with providing the customer with up-to-date information relating to shipping dates, product availability, product application, etc. The customer service management teams act as an interface between the customers and the functional departments like production and logistics in administering product and service agreements.
- Demand Management: Demand management is the key to effective supply chain management. It plays a major role in balancing the customer’s requirements with the firm’s supply capabilities. Demand management involves determining forecasting methods to gauge customer demand, synchronizing demand with the supply capabilities of the firm, and developing contingency management systems to handle variations in demand.
- Customer Order Fulfillment: The effectiveness of a supply chain is determined by its ability to fill customer orders on time. A high order fulfillment rate with low costs requires coordination between various organizations across -the supply chain and their internal functions like manufacturing, distribution and transportation. The order fulfillment process includes activities like, receiving orders, defining the for order fulfillment, evaluating the logistics network developing plans for order fulfillment etc.
- Manufacturing Flow Management: Manufacturing flow management is concerned with ensuring the smooth production of goods and developing flexible production processes that can respond to the demands of the target markets. This supply chain process includes activities like determining the degree of manufacturing flexibility required, manufacturing and material planning, determining manufacturing capabilities, synchronizing production and demand, etc.
- Procurement: Supplier relationship management guides the interactions of the firm with its suppliers. This process aims at developing long with suppliers to ensure uninterrupted flow of supplies for the firm’s manufacturing processes. Such relationships are essential for effective supply chain management.
- Product Development and Commercialization: Reducing the time to market is one of the objectives of supply chain management. The product development and commercialization process involves establishing cross-functional product development teams, designing and building prototypes, developing product roll-out plans, etc. This requires the integration of customers and suppliers into the product development process to ensure speedy roll-out of new products.
- Returns Management: Many companies are forced to recall products to rectify defects upgrade the products or recycle them. Thus the returns management capability of a firm also plays a major role in providing a competitive edge to the firm. There may be many environmental issues associated with, the way a firm handles its returns. Hence, managing the products returned is also a major part of supply chain management.
Each of the above processes consists of a set of activities from within various functions of the organizations comprising the supply chain. These functions include marketing, production, finance, research and development, logistics etc.
Credit: Strategic Financial Management-MGU