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Supply Chain Management Overview - Participants and Processes

2004-09-04
 

What is Supply Chain Management?

Supply chain management is the combination of the process and information technology that integrates the suppliers of raw materials or components, the manufacturers or assemblers of the finished products, and distributors of the products or services into one cohesive process to include demand forecasting, materials requisition, order processing, order fulfillment, transportation services, receiving, invoicing, and payment processing.

SCM usually refers to the redesign of supply chain processes in order to achieve streamlining. It is generally performed only by large corporations with large suppliers. B2B exchange can extend Supply Chain Management to all trading partners regardless of size by providing a central location to integrate information from all supply chain participants.

Participants in a Supply Chain

  • Supplier - An organization that provides goods and/or services to a purchasing organization (a manufacturer or a distributor). It is often used synonymously with vendor but may also refer to an internal company resource.
  • Manufacturer - The company engaged in the original production and assembly of products, equipment or services. It sometime refers to a company that purchases such products or services manufactured or assembled in accordance with company specifications.
  • Distributor - A external entity who sells for a supplier or manufacturer directly and often collects all payments from customers and maintains an inventory of the supplier's or manufacturer's products.

Processes of Supply Chain Management

  • Demand Planning and Forecasting - A critical success factor to supply chain management is accurate demand forecasting. Supply chain Software systems utilize sophisticated mathematical model for predicating future demand using historical data. The accuracy of the demand forecasting is largely dependent on how abnormal data is treated in the demand forecasting. Demand forecasting is an ongoing process. Supply chain management software systems can generate alerts at the frequencies of your preference, whether it's on a weekly, or monthly basis.
  • Procurement - This is the process of choosing the suppliers that will deliver the goods and services you need to manufacture or assembly your products or create your services. It involves price negotiation, receiving, and verifying the shipments.
  • Manufacturing and Assembly - This is the manufacturing step. Raw components are assembled into final products or raw materials are manufactured into finished goods. Manufacturing involves the activities of production, testing, packaging and preparation for delivery.
  • Distribution - This is the process of delivering your products or services to consumers. Distribution involves warehousing, delivering, invoicing and payment collection.
  • Return - Return and refund is an important part and also the problem part of supply chain management. Supply chain management system should have infrastructure in place for receiving defective and excess products back from customers.



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