In business, supply chain management, which includes the transportation and storage of materials, of the jobs-in-plant control, and of final goods and end-of-life inventory, is the mechanism that brings it all together. In supply chain management, it is necessary for companies to establish a chain of command so that critical mass is reached before an issue or problem occurs. In supply chain management decisions are made when materials are in their optimum condition at the most appropriate time for their ultimate destination. Transportation ensures that goods reach their intended destinations. Management of these goods’ arrival and their distribution or storage is essential to good distribution management.
Supply chain management describes five stages of interaction that occur between the supplier and the manufacturer. At the beginning, the manufacturers look for raw materials and, if required, suppliers for the finished product. The manufacturers look for raw material sources that can supply the volume that the company needs at the price that the company can afford.
At this stage, companies usually determine how to best make use of their existing resources in terms of transportation, storage, gathering of materials, and so on. Identification of a company’s long-term raw material requirements is also considered. At this point, companies must identify the maximum number of units that can be produced, in order to meet supply and manufacturing needs. This short-term goal is called long-term inventory. Long-term inventory is important because it minimizes the risk of inventory losses by maintaining a constant level of supply.
Once the long-term inventory requirements have been defined, companies then need to identify the suppliers that they can obtain access to. Different types of logistics allow different types of access, including manufacturers, distributors, brokers, or third-party logistics suppliers. Most supply chain management systems use these four types of suppliers to provide the necessary raw materials and products to meet customer demands. Different supply chain management software packages have different modules that identify which suppliers to use based on their logistical capabilities and price, among other things. These modules also allow users to make their suppliers available as a logistics supplier.
Supply chain management systems are designed to simplify processes. It starts with identifying key figures such as volume, cost, status, location, and frequency of shipping and delivery. These key figures help supply chain managers determine the types of activities that require internal resources, as well as those external to the organization that require external resources. After these key figures are determined, managers can determine the number of individual units that are needed to fulfill the identified demand. This involves defining the processes that must be in place, as well as the processes that can be automated.
Another key factor in having an effective supply chain management system is understanding how to collect the data that is necessary in order to make the decisions that are necessary. Good logistics systems will enable managers to gather the information needed to determine if there is a need for additional capacity, or if a route should be changed. Similarly, a good supply chain management system will enable managers to determine if a process is inefficient or if it can be automated.
The process element of supply chain management refers to the four phases that are involved in the supply chain cycle. These include plan, develop, implement, and control. In the planning phase, strategic plans are made in order to determine what products and activities will be required to meet future demands. Strategic plans are reviewed periodically to ensure that the strategies remain viable over time. Implementing processes, as well as testing the strategies is another important phase of this process element.
Controlling the packaging logistics, however, is not an easy task. For example, it is impossible to know if all suppliers are providing their services in real time without constant communication. This is why some supply chain management systems incorporate tools that enable managers to monitor suppliers in real time. Real time data is also important because suppliers may temporarily run out of parts or stop producing a product due to weather conditions or other external factors. Monitoring these factors, along with the status of your products, is a very important part of supply chain management.