Understanding the Supply Chain Process

Supply chain is defined as “a system of organizations, people, technology, activities, information, and resources involved in moving a product or service from supplier to customer.” It is the supply chain activities that help to transform natural resources, raw materials, and components into finished goods, which is finally delivered to the end customer. Hence, supply chain consists of various phases such as sourcing, procurement, storage of raw materials, production planning and scheduling, logistics, warehousing, inventory, order fulfillment, customer service or returns management. Let’s look at each phase in detail to understand the reasons that make supply chain management a challenging task.

Sourcing

Sourcing is the process of finding, evaluating and engaging suppliers of raw materials or services. It is a very important business process since sourcing and procurement constitute one of the largest expenses. Sourcing involves activities such as market research, vendor evaluation, and negotiation of contracts.

Procurement

It is the acquisition of goods and services that satisfies the procurer’ needs in terms of quality, quantity, location and time that too at the best possible price.

Raw Materials Storage

It refers to the process of segregating, separating, and storing raw materials so that when the production process starts the raw materials are in good condition.

Production Planning and Scheduling

It refers to the process of planning, scheduling, and coordinating all manufacturing activities. It is managing and allocating resources, events, and processes for creating goods and services. Simply put, it is finding answers to questions such as what, when, where and how to produce.

Logistics

It is “the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements." It includes both forward and reverse logistics.

Warehousing

It refers to the storage of manufactured goods and products. It includes functions such as receipt, identification, and assembling, testing, verification and so on.

Inventory

It is a detailed itemized record of the finished but unsold goods.

Order Fulfillment

It refers to the complete process right from sales enquiry to the delivery of the product to the customer. The different steps in the order fulfillment process are product enquiry, sales quote, order configuration, order booking, order confirmation, invoicing, order planning, order processing, shipment, and delivery.

Returns Management

It refers to the effective management of the returned goods.

Supply chain thus covers all the movement of a product from the point of origin to the point of consumption. Hence effective supply chain management is essential if the company wants to enhance company revenue and profitability.

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