Components of Supply Chain Management
Today, it is the basic requirement amongst customers that businesses produce defect-free products to the customer faster and be more consistent in the quality. This has necessitated that the players of supplier- manufacturer-distributors to co-ordinate amongst themselves. This relationship is further accentuated in a globalised environment where the various players are situated across different parts of the world. The changing technological trends and the economic downturns too have vastly contributed to market uncertainty - products have to be produced in the best possible way. This uncertainty requires flexibility among the channel participants and has thus made Supply chain management important for the business community.
Let us now understand the players of a Supply chain. Supply chain consists of an organisation, a supplier and customer, all linked together by an integrated process where there is flow of inventory goods from the raw source (supplier) to final delivery (customer). For the optimum system performance each part of supply chain has to be linked in a synchronised manner.
According to Mentzer (2001) "SCM is the process of managing relationships, information and materials flow across enterprise borders to deliver enhanced customer service and economic value". According to him, SCM can also be viewed as a system process with clearly identified inputs, outputs and a structure for action.
Let us now understand the different parts of the Supply chain management:
- Plan - This is termed as the strategic portion of SCM. Companies require a strategy for managing all the resources that move towards meeting customer needs for their product or service. A major piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs effective and delivers high quality and value to customers.
- Source - Companies must select suppliers to deliver the goods and services they need to produce their product. Henceforth, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and generate metrics for monitoring and improving the relationships. And later, SCM managers can combine processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments.
- Make - This step is termed as the manufacturing phase. Supply chain managers schedule the activities that are basic for production, testing, packaging and preparation for delivery. This is the most metric-intensive part of the supply chain - one where companies are able to measure quality levels, production output and worker productivity.
- Deliver- This part is referred to as logistics, where companies coordinate the receipt of orders from customers, build a network of warehouses, pick carriers to get products to customers and set up an invoicing system to accept payments.
- Return - It could be a more problematic part of the supply chain for most of the companies. Supply chain planners have to generate a responsive and flexible network for receiving defective and abundant products back from their customers and support customers who have problems with delivered products.