SUPPLY CHAIN MANAGEMENT

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What is Supply Chain Management?

Supply Chain Management (SCM) is that the management of the flow of products and services from point of origin to point of consumption. As a Lean Organization, Supply-chain management is a cross-functional approach that focuses to manage 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 toward the top consumer. As organizations strive to specialise in core competencies and become more flexible, they reduce their ownership of raw materials sources and distribution channels.

SCM is a management approach that integrates Service Functions of an Organization as it covers the following functional areas maintains a desired balance to satisfy all stakeholders of the Value Chain:
  • Customer-relationship management
  • Customer-service management
  • Demand-management style
  • Order fulfilment

Benefits of good Supply Chain Management:

  • On time delivery
  • Higher efficiency rate
  • Improved quality control
  • Keeping up with demand
  • Shipping optimization
  • Reduced overhead costs
  • Improved cash flow
  • Better collaboration

Best practices in Supply Chain Management:

  • Tierisation of suppliers–it means establishing a tiered hierarchy of suppliers
  • Reverse logistics/recyclable packaging– it refers to planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the aim of origin for the purpose of recapturing value or proper disposal.
  • Vendor managed inventory (VMI)– it is an inventory management system where by the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items
  • Milk round system – It involves material collection, unloading, and production wiz allocation of trucks at the vendor’s end at fixed frequency/time of movement of trucks based on an exact production requirements in small lots. The collection and supply of material is exactly in tune with the OEM’s production requirements
  • Hub and spokes arrangement –It is a figurative representation of supplier network established in form of a wheel with a hub and spoke. The consolidation center (Hub) receives material from a number of suppliers (Spokes) and subsequently organizes supplies of the required material to the OEM
  • Bar coding ,RFID –It means using bar codes and RFID Tags to trace the movement of material across the supply chain so as to not lose value and optimise costs of handling
  • 3PL (3rd Party Logisctics) –It means using third party businesses to outsource elements of its distribution, warehousing, and fulfilment services
  • 4PL (4th Party Logistics) – Many organizations outsorce the complete supply chain operations which are fulfilled by the 4th Party Logictics providers
  • Cross docking –A practice in transportation of unloading materials from an in-bound vehicle and loading these materials directly into outbound trucks, trailers, or rail cars with little or no storage in betweento combine small loads from different points and redistribute saving on dwell time, storage and costs
  • Drop shipping – In this technique the supplier ships directly to the end customer rather than to the seller, after due authorization from the latter, saving both time and re-shipping costs
  • Risk-pooling -In this strategy the suppliers, such as, contract equipment manufacturers (CEMs) aggregate demand from many buying OEM companies and thus reduce uncertainty through pooling of the risks involved with various members at the same level of supply chain

JIT – JUST IN TIME

What is JUST IN TIME?

Just-in Time is a methodology in Lean Manufacturing that is aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It originally mentioned the assembly of products to satisfy customer demand exactly, in time, quality and quantity, whether the `customer' is that the final purchaser of the merchandise or another process further along the production line.Just in time is a common inventory management technique and type of lean methodology designed to increase efficiency, cut costs and decrease waste by receiving goods only as they are needed.

Pros and Cons of JUST IN TIME:

With the proper approach, utilizing a JIT inventory management strategy features a number of potential benefits for businesses:
  • Lower inventory holding costs
  • Improved cash flow
  • Less dead stock
On the flipside, though, Just in Time inventory management isn’t without its potential disadvantages:
  • Problems with order fulfilment
  • Little room for error
  • Price shocks and fluctuation in profits margins

LOGISTICS & DISTRIBUTION MANAGEMENT

What is Logistics and Distribution Management?

Distribution logistics (also known as transport logistics or sales logistics) is the link between Operational Facility and the Market. The area comprises all processes across the chain - from manufacturing companies to customers. Customers, here, is a term that includes final user as well as receiver at each nodes or points across the chain including the Internal Customers of the manufacturing facility itself. In concrete terms, distribution logistics includes goods handling, transport and interim storage. Sustainably structured information, Strategic decision-making and controlled processes are essential for implementing successful transport logistics.

Elements in Logistics and Distribution management:

  • Warehousing
  • Transportation
  • Inventory control
  • Order processing

Benefits of aLogistics and Distribution Management:

With a proper Logistics and Distribution Management System, an organization can ensure reliability, delivery-flexibility, on-time delivery and best delivery condition, thereby satisfying the customers to the fullest. The implications of lean manufacturing extend beyond the production floor to warehousing and fleet operations as well. The warehouse is the core of manufacturing operations, moving material in and completed products throughout the facility and out the door. Warehouse efficiency impacts the bottom line. Due to high traffic and growing importance of warehouses, the potential to go lean in these areas is huge as it directly reflects in the Cash-flow.

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