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Supply chain management is the management of the entire network of supply from original source through to meeting the needs of the end-consumer.
Supply chain management deals with the task of managing three key flows:
- Material flow includes the movement of goods from a supplier to a customer, as well as customer returns.
- Information flow involves transmitting orders and updating the status of delivery.
- Financial flow consists of credit terms, payments, payment schedules, etc.
Supply chain management focuses on the following activities:
- purchase and supply of materials, components and information;
- stock control;
- distribution strategy;
- physical distribution.
Benefits of SCM:
- adding value to output;
- a reduction in stocks;
- avoidance of the so called ‘bullwhip effect’;
- benefits in terms of time-saving.
Partnership supply relationships are long-term co-operative agreements for the joint accomplishment of goals.
Features of a partnership agreement are:
- the sharing of success;
- multiple points of contact;
- long-term commitments;
- joint learning;
- information sharing;
- joint problem-solving;
- and, most important of all, trust.
Logistics is the task of coordinating material flow, information flow and funds flow across the supply chain.
Components of logistics mix:
- Facilities (include storage and distribution depots in which stocks of materials and finished product are held to ensure availability to the next stage in the supply chain).
- Inventories or stocks (the need to ensure adequate stock levels to meet demand has to be traded off against the cost of stock holding).
- Transport (retailers have to manage a transport operation that might involve different forms of transport, different sizes of containers and vehicles and the scheduling and availability of drivers and vehicles).
- Information Flows (To get products to where retailers need them, it is necessary to have information, not only about demand and supply, but also about volumes, stock, prices and movements. Retailers use that information to have a more efficient and effective logistics operation).
- Unitization and packaging (this concerns the way in which goods are packaged and assembled into larger units).
Lean production is an assembly-line methodology developed originally for Toyota and the manufacturing of automobiles. It is also known as the Toyota Production System or just-in-time production.
Lean production elements within this approach include:
- Just-in-time (components arrive just as they are needed);
- Kaizen groups – (individual employees and groups are encouraged (or in some cases obliged) to contribute suggestions for productivity and quality improvements. Every employee should be constantly focused on ways of carrying out their job more effectively);
- Total quality management –(a philosophy of zero defects is created throughout the entire organization, reducing the need for rework and cutting wastage);
- Cell production – (employees are grouped into teams; each team is generally assigned 'internal customers' who will demand certain levels of performance);
- Simultaneous engineering – (areas such as new product design are analyzed to assess whether time can be saved by carrying out some processes in parallel with others);
- Outsourcing – (it is contracting with another company or person to do a particular function).
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