Problem Areas of SCM:

SCM is highly integrated process and need very effective and integrated distributions networks, some of the problem in managing SCM may be:

§  Distribution Network Configuration

§  Distribution Strategy

§  Information Sharing

§  Inventory Management

Distribution Network Configuration:

·         Setting up appropriate numbers and locations of suppliers, production facilities and warehouses is a big challenge.

Distribution Strategy:

·         Establishing a strategy to ensure smooth flow of materials and goods is another big task.

Information Sharing:

·         Among various locations and setup is another and setup is another issues for establishing successful SCM.

Inventory Management:

·         Deciding on appropriate quantity of materials and goods to be maintained is another big stress area in SCM.

SCM Activities:

All the SCM activities can be grouped together into:

§  Strategic

§  Tractical

§  Operational

Strategic Activities:

·         Planning Numbers, Locations and Size of Distribution Network.

·         Deciding on partnership with suppliers and buyers.

·         Information Technology Infrastructure Setup

·         Make or buy decisions.

·         Product Design Coordination

Tactical Activities:

·         Production Decisions regarding contracting and scheduling.

·         Inventory decisions regarding quantity.

·         Transportation planning for goods.

·         Payments terms structuring.

·         Sourcing decisions of materials.

Operational Activities:

·         Daily Production and Distribution Planning

·         Production scheduling of each manufacturing facility resources minute by minute.

·         Planning to meet demand.

·         Daily Inventory Control.

·         Logistics Control.

·         Performance tracking of all activities.

SCM Effects:

§  This effect is related with forecasted error. We all know we maintain inventory to manage uncertainty in demand, accordingly inventory is managed based on possible forecasted demand.

§  And as per Whiplash, there is always a chance of error in the forecasted demand, and this error effect keep on increasing when we go farther from consumer to supplier.

§  Effectively, multiplied effect ends up providing excess or shortage of inventory quantity.

§  Alternatively to this forecast driven supply chain is demand driven supply chain, which reacts to actual customer orders.

§  The net result is near perfect visibility of customer demand and inventory movement.

§  But it is not easy to implement this alternative because this method requires significant investment in Information Technology and requires a culture with focus on customer demand.


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