As I discussed in my previous article, Operations Management is all about converting inputs into outputs. Furthermore, let us discover the supply chain aspect of the operations. Supply Chain Operations are a crucial part of the Operations Management. Be it any type of product, it has to reach the customers through the right channels.
What is Supply Chain?
Supply Chain Definition
Supply chain (SC) is the set of multiple processes from raw material procurement to the end product distribution. It is basically the flow of information and material among multiple entities such as supplier, manufacturer, distributor, retailer and the ultimate customer.
Let’s look into an example of a dairy that provides milk and milk products across the nation. How does it ensure that a perishable item like milk reaches to the outlets on time and doesn’t cross the expiration date?
A dairy procures milk from the farmers. After the procurement, it’s processed in the factory for homogenization, making milk products like ice cream, etc.
Once the end product is ready, the factory dispatches it to the distributor, who connects it to the retailers. At last, a retail outlet like Winco is the place where the customer finally receives all the milk products.
Stages of Supply Chain Operations
Supply chain operations consist 3 stages:
Inbound Supply Chain Operations:
In this stage, a manufacturer or the service provider obtains raw materials from the supplier. For example, a dairy procures milk from the farmers.
There may be tiers of suppliers and not just one. To illustrate, one supplier would supply to another who would finally supply it to the manufacturer. A manufacturer can supply the product to internal customers like sales and also external customers like the distributors, retailers, and the end customers.
In the case of made-to-order or turnkey supply chain, there may be no moderators like retailers and the distributors. The factory may directly supply it to the end user.
In-house Supply Chain Operations
In this component, the manufacturer already has the raw materials in-house. Moreover, the factory manufactures the end product through fabrication, processing or any other modification. To illustrate, a dairy processes milk and converts it into ice-cream or butter during the in-house supply chain process.
Outbound Supply Chain Operations
In this stage, a manufacturer dispatches the end products to the distributors so that he can send them to the retail outlets, where the customers can buy them.
To summarize, this is the last stage of the supply chain. Furthermore, its sending goods out of the factory. To illustrate, the dairy processes the milk and dispatches it to the distributors or retailers or also the end customers in different scenarios.
Flows of Supply chain Operations
Information flow starts with the customers and ends with the suppliers and works in a sequence.
Stages of Information flow:
In general, supply chain starts with the customer.
* A customer places an order, either online or picks up an item from the shelf of a retail outlet.
* The retailer notes the order and informs the distributor about the order.
*The Distributor does the same by reaching out to the sales department of the product.
2. Order Processing:
* The Sales department sees if they have the finished goods in stock and if not, they inform the planning department.
* The Planning department sees if they have the raw material and the actions required in place or not. They make calculations and figure out the appropriate actions to complete the order.
* The Planning department informs the Production planning department so that the information is finally in the factory.
* The Production Planning department informs the Purchasing department.
* The purchasing department connects with the suppliers for ordering required raw material for manufacturing the product when required. Once the process is complete, and the finished goods are available, the production informs the sales.
Material flow is the exact opposite of the information flow. It is a process of procuring raw materials, converting them into end products and making them available for the customers.
Stages of Material flow
* Once the supplier receives the order information from the purchasing department, he sends out the required material to the stores.
* The factory picks up the material from the stores for processing it into a quality end product.
* The factory stores the end products into a far-warehouse.
* The Sales department picks up the product from the far warehouse.
* The sales dispatch the products to the distributors.
* The distributor dispatches the product to the retailers
* Finally, the retailer delivers the end product to the customer.
To summarize, Supply Chain Operations include three main phases, inbound, in-house and outbound. All the phases have different challenges and issues. The supply chain operations start once the information reaches the right channels and is complete when the end product reaches the right channels.
What are your thoughts on the supply chain issues? How can businesses optimize their process of making the products available to the customers within a time frame and in a flawless condition?
Drop us a comment!