What is Supply Chain Management Process?

Supply chain management is defined as the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

SCM draws heavily from the areas of operations management, logistics, procurement, and information technology, and strives for an integrated approach.

The theories in Supply Chain Management include Resource-based view (RBV), Transaction cost analysis (TCA), Knowledge-based view (KBV), Strategic choice theory (SCT), Agency theory (AT), Channel coordination, Institutional theory (InT), Systems theory (ST), Network perspective (NP)Materials logistics management (MLM), Just-in-time (JIT), Material requirements planning (MRP), Theory of constraints (TOC), Total quality management (TQM), Agile manufacturing, Time-based competition (TBC), Quick response manufacturing (QRM), Customer relationship management (CRM), Requirements chain management (RCM) and Available-to-promise (ATP).

What is Supply Chain Management Process?

Supply Chain Management Building Blocks

The building blocks of Supply Chain Management are Strategic Planning, Demand Planning, Supply Planning, Procurement, Manufacturing, Warehousing, Order Fulfillment and Transportation business processes.

1. Strategic Planning Process

Strategic Planning Process involves the strategic supply chain design and strategic sourcing.

Strategic Supply Chain Design Process: Strategic Supply Chain Design is the design, evaluation, and optimization of the supply chain model used in the planning applications. Every part of the supply chain such as locations, transportation lanes, resources and products are modeled to execute planning based on this network. This helps to respond immediately and accurately to the new developments by tracking alert situations in the supply network.

Strategic Sourcing Process: Strategic Sourcing Process helps to identify a minimized set of core suppliers with whom to establish strategic relationships, and also define the parameters that drive procurement execution. Vendor analysis and purchasing statistics are used to evaluate potential suppliers. Performance management through spend and contract compliance analytics are also done for enabling the strategic sourcing process.

2. Demand Planning Process

Demand Planning process involves Forecasting, Lifecycle Planning , Promotion Planning and Consensus Demand Planning.

Forecasting Process: Forecasting predicts future demand based on historical and judgmental data. Forecasts can be created in using different methods such as statistical methods, causal analysis, human judgment or combination of all the above. Forecast accuracy can be improved using statistics and the overall performance management can be analyzed through forecast accuracy analytics.

Different statistical forecasting methods are available such as exponential smoothing, holt, winters, croston, moving average, linear regression, and seasonal linear regression

Lifecycle Planning Process : Life cycle planning involves planning the product life cycle. Lifecycle Planning simulates based on the forecasting data the launch, growth, maturity and discontinuation phases of different products.

Promotion Planning Process: Promotion Planning Process enables to plan promotions or other special events separately from the rest of your forecast. Promotion effect is calculated using causal techniques to measure past promotional impact and projected into designated periods in the future. Promotion planning can be used to plan one off events such as the millennium, repeated events such as quarterly advertising campaigns, trade fairs, contests etc.

Consensus Demand Planning Process : Consensus Demand Planning Process creates a consensus demand plan by integrating all available information. This is a result of combining various data such as Forecast, Promotions Budgets, Sales plans etc.

3. Supply Planning Process

Supply Planning process involves Safety Stock Planning, Supply Network Planning, Outsourcing, Distribution Planning, Customer Collaboration and Supplier Collaboration.

Safety Stock Planning Process: Safety Stock Planning Process arrive the appropriate level of safety stock inventory for all intermediate and finished products at their respective locations to meet a target service level.

Supply Network Planning Process: Supply Network Planning process calculates quantities to be delivered to the locations to match customer demand and maintain desired service level.

Outsourcing Process: Outsourcing process enables outsourcing of manufacturing facilities to a third party, known as the subcontractor.

Distribution Planning: Distribution Planning process determine the best short term strategy to allocate available supply to meet demand and to replenish stocking locations.

Customer Collaboration Process: Customer Collaboration process allows vendor to assume responsibility for planning the levels of inventory at the customer location.

Supplier Collaboration Process: Supplier Collaboration Process enables supplier to receive demand and stock information and performs replenishment planning tasks for manufacturer

4. Procurement Process

Procurement process involves Purchase Order Processing, Receipt Confirmation and Invoice Verification.

Purchase Order Processing : Purchase Order Processing fulfills the direct procurement requirements through the sourcing, issuance, and confirmation of purchase orders.

Receipt Confirmation processing: Receipt Confirmation processing informs other departments about the received and confirmed quantity of ordered goods.

Invoice Verification process: Invoice Verification process receives, enters and checks vendor’s invoice for correctness.

5. Manufacturing Process

Manufacturing Process involves Production Planning / Detailed Scheduling, Manufacturing Execution.

Production Planning / Detailed Scheduling process: Production Planning / Detailed Scheduling process supports the process of assigning production orders to resources in a specific sequence and time frame.

Manufacturing Execution: Manufacturing Execution process supports the process of capturing actual production information from the shop floor to support production control and costing processes.

Supply Chain Management Building Blocks

6. Warehousing Process

Warehousing Process involves Inbound Processing, Outbound Processing, Cross Docking, Warehousing, Storage and Physical Inventory.

Inbound Processing: Inbound Processing comprises all the steps of an external procurement process that occur when the goods are received.

Outbound Processing: Outbound Processing prepares and ships goods to their destination

Cross Docking: Cross Docking Processes merchandise in a distribution center or warehouse where the goods are brought from the goods receipt directly to goods issue without being stored.

Warehousing & Storage: Warehousing & Storage Processes warehouse internal movements and storage of materials.

Physical Inventory: Physical Inventory supports all activities for planning and executing the physical inventory

7. Order Fulfillment Process

Order Fulfillment Process involves the sales order processing and billing business process.

Sales Order Processing: Sales Order processing allows the order entry, pricing, and scheduling order for fulfillment.

Billing Process: Billing process considers all activities from issuing the invoice to the incoming payment.

8. Transportation Process

Transportation Process involves the transportation planning, transportation execution and freight costing processes.

Transportation Planning Process: Transportation Planning process creates an optimized, executable transportation plan for the enterprise.

Transportation Execution Process: Transportation Execution process covers the complete and integrated solution process to create, execute, and monitor shipments

Freight Costing Process: Freight Costing process calculates and settles the freight costs.