SCM & Distribution Guide

    September 29, 2006

Supply Chain Management is a decisive element of good overall business management. To ensure profits, customer satisfaction, repeated sales and future growth a company needs to have an efficient supply chain management for any type of sales.

Thus, goodwill building and corporate profitability are seriously dependent on it. As a discipline, supply chain management is gaining regard as more and more companies are recognizing the significance of managing the network of facilities and distribution options that facilitate procurement of raw materials, transformation of these raw materials into finished products, and the distribution of these finished products to the customers.

A supply chain exists in every company whether it is manufacturing products or offering services. However, its complexity varies greatly from business to business. For instance, a company providing services may have a lesser complex supply chain than that of a company manufacturing products. Supply chain management is undertaken basically to fulfill the goals of an organization. These goals can be both long term as well as short term. This term greatly influences the kind of decisions taken for supply chain management.

Supply Chain Management primarily encompasses the processes by which raw materials are acquired and used to manufacture the end products. It also includes the processes involved in the delivery of the finished goods, and the ability to process returned goods. Thus, the supply chain management basically covers the issues related to planning, sourcing, producing, delivering and servicing. Its fundamental purpose is to ensure that the products can be produced and delivered in an efficient and profitable manner.

The five primary elements which together comprise the Supply Chain Management are planning, sourcing, production, delivering, and accepting returns. Each of these elements is critical for a business to flourish.

The planning stage involves drawing up of strategic plans for the company. These plans or decisions are very critical for a company as they allow a company to develop a strategy for managing their production flow process. The process of sourcing which is an extension of the planning process also plays a significant part in deciding the profits a company is going to make. It is during this phase that the company decides from where to procure the raw materials needed for the production. The company has to select a supplier who gives it best quality raw material at the lowest possible prices, so as to maximize its profits and provide quality finished products to the consumers. Managing inventory of the goods and services a company receives from its suppliers is another very significant task involved in supply chain management.

After planning and sourcing a company has to start production. This is the most important step in a supply chain. It includes all the activities and decisions necessary for production, testing, packaging and preparation for delivery. Delivery is the next phase to consider. It is generally referred to as logistics or shipping. In this phase a company has to set up a proper delivery mechanism, under which he has to develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. Last but not the least element of the Supply Chain Management is the returns process. Customers are not always satisfied with the products, thus, every company should have a network for receiving the returned goods and satisfying its customers.


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