Supply chain management is a cross functional approach which involves managing the movement of raw materials into an organization, internal processing of materials into finished goods, and the movement of finished goods out of the organization and towards the end consumer. The organizations are concentrating on the core competencies and they are outsourcing the activities like distribution and logistics, as a result number of supply chain partners are increasing. The purpose of supply chain management is to improve trust and collaboration among supply chain partners and in turn it improves inventory visibility and the velocity of inventory movement. Several models have been proposed like SCOR, American Productivity and Quality Center for understanding the activities required to manage material movements. Supply chain activities can be grouped into strategic, tactical, and operational levels.
- Strategic activities involves optimizing networks, including the number, location, and size of warehouses, distribution centers and facilities.
- It also involves strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.
- Product design coordination, so that new and existing products can be optimally integrated into the supply chain, load management
- Information Technology infrastructure, to support supply chain operations and make or buy decisions.
The tactical activities involves decision taking regarding the sourcing contracts and purchasing, production decisions, inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, bench mark practices and the mile stone payments comes under the tactical activities. They also focus on customer demand and habits.
Operational activities includes daily production, distribution planning, production scheduling for each manufacturing facility, demand planning and forecasting, inbound operations, production and out bound operations. The operational concerns of the supply chain range from looking over the daily production schedules to planning distribution routes for all aspects of the supply chain.
All these activities together constitute supply chain management. Hence, supply chain management should be very efficient as it is associated with every level of business processes.