Supply chain management ensures efficient and cost-effective transformation of raw materials into final products and their delivery to customers. It involves planning, development, production, logistics, and returns, with strategic, tactical, and operational activities. Forecasting delivery models help maintain efficient supply chain management, while the whiplash effect can be mitigated by using Kanban, a demand-driven method.
A supply chain is the collection of steps a company takes to transform raw components into final products and deliver them to customers. Supply chain management (SCM) is the process used by a company to ensure that the supply chain is efficient and cost effective. This typically includes five phases: planning, development, production, logistics and returns.
During the planning stage, a strategy must be developed to address how a particular product will meet customer needs. A significant part of this strategy often focuses on planning a profitable supply chain. The development phase involves building a strong relationship with the suppliers of the raw materials needed to make the product that the company supplies. This stage involves not only identifying reputable suppliers, but also creating methods for shipping, delivery, and payment.
In the next stage, the product is manufactured, tested, packaged and scheduled for delivery. Then, in the logistics phase, customer orders are received and the delivery of the goods is planned. The final stage of supply chain management is when customers can return defective products. The company must also answer customer questions during this stage.
Another model for supply chain management groups all management activities into three categories: strategic, tactical, and operational. Strategic activities include building relationships with suppliers and customers and integrating information technology (IT) within the supply chain. Studying competitors and making decisions regarding production and delivery would fall under the tactical category. The operational category includes the day-to-day management of the supply chain, including the execution of production schedules.
Businesses use forecasting delivery models to have the appropriate inventory needed to meet fluctuations in customer demand. Forecasting delivery models help companies maintain more efficient and therefore more effective supply chain management strategies. Under this model, participants at the lower end of the supply chain, rather than those closest to the customer, frequently increase their orders as demand increases. Conversely, when there is a decrease in demand, they decrease or stop their orders to avoid excessive inventory.
This greater variation in demand that can be seen in the supply chain as one moves away from the customer is known as the whiplash or bullwhip effect. One possible solution to this is Kanban, a demand-driven supply chain management method. Using this method, which originated in Japan, supply chain participants would react to actual customer orders, not their predictions.
Protect your devices with Threat Protection by NordVPN
