Supply chain management : 7 Most Popular Questions with Answers- Part II
Supply chain management questions and answers article explains commonly asked questions like what are key supply chain processes, benefits, costs, challenges and partners. Clear answers to these questions are not easily available. Therefore, purpose is to explain about supply chain in simple and clear language and full detail.
Popular supply chain questions with answers are as follows :
Q1. What are key supply chain processes?
Key processes are explained as follows:
1. Demand to Supply Management:
Unconstrained Demand plan is generated by demand planner basis historical sales data and inputs from sales and marketing functions. Supply planner generate production plan basis demand plan and inventory norms and share with production units.
Production planner makes day level production plan. Materials are arranged basis Daily production and forecasted supply plan.
Finished goods produced are dispatched from factory warehouse to distribution centers.
Goods are invoiced from distribution centers to the customers.
2. Customer Service management:
This process involves managing customer relationship end to end. Customer will share the orders with order processing centers who will check for advance payment or credit terms and provide go ahead for invoicing.
Distribution centers will check the available stocks and service as per customer shelf life requirements and stock availability.
Time slots are taken from Organized Trade customers to service them. Joint business planning is done with customers to arrive at aligned forecast and improve product freshness and on shelf availability
3. Supplier management:
End to end supplier management process from sharing Purchase Order with the suppliers to the payment to the supplier.
Process includes sharing Purchase order with supplier as per agreed contract.
Supplier will deliver the goods as per the PO terms in quantity, quality and delivery date.
Once the goods are received, they are inspected and quality checked if as per specification and requirement.
Goods are received in the system and invoices shared with Finance for payment. Payment is done as per agreed payment terms with the supplier.
4. Integrated Business Planning :
IBP is the cross functional integration process which include Portfolio Management Review, Demand Management review, Supply Management Review, Finance and Integrated reconciliation review and Management Business review.
It is more about people behaviours then process.
5 New Product Development and Launch:
Market research is done for potential of new product and forecast is generated basis inputs from sales and marketing. R&D conducts small trials and scale up the product with validation runs.
Once the product is ready and successful launch is planned. Materials are procured and Products are supplied to the market as per the requirement
Brand and trade activations are done in parallel to make consumers aware about the new product.
Q2. What are the benefits of Supply Chain Management?
Benefits of supply chain management are explained as follows :
1. Increase in sales and profits:
Supply chain improves product availability and freshness by building lean and efficient chain for customer sand consumers thereby contributing to increased sales.
Reduces cost in materials procurement, inventory, storage, warehousing and transportation. Drive continuous improvement on cost reduction projects to delivery benefits and improve profitability.
Reduce inventory and align supplier on favorable payment terms to reduce working capital requirement and improve cash flow.
2.End to end supply control:
Supply chain integrates all the supply functions. It guides, control and manage end to end supplies from procurement of materials to delivery of Finished goods at the customer distribution centers.
SCM procures materials, plan production, transport goods from factory to Warehouses and invoice to customers and ensure delivery at their doorstep.
Supply chain brings agility in the organization. There is continuous drive to reduce lead times, costs, quality release and adopt lean ways of working to build efficient supply chain.
It acts as a challenger in the system to question status quo and drive continuous and process improvements. It is flexible to change in demand scenario and align supplies to support the business.
4. Improve customer service:
Deliver excellent customer service by improving product availability, timely delivery and right product quality to the customers.
Win Win Projects are undertaken with customers for joint business planning to improve forecast accuracy, product freshness, guide customers on best practices on stock keeping and storage and route optimization to reduce costs.
5. Analytical and Fact based:
Supply chain function is fact based and logical and use lot of data and information to make sound decisions. It uses optimization tools to work out at the most effective solution on network optimization, route optimization, product capacity mapping, SKU rationalization, supplier selection and many more
Supply chain has end to end demand and supply visibility which it shares with senior management on how business is progressing and is it in right shape to meet the targets.
6. Quality in value chain:
Supply chain plays an important part in delivering quality in end to end value chain by ensuring proper handling and transportation of goods. Bad and damaged goods are big loss to the organization and trade partners
7. Return management:
Product returns are a tedious task. Supply chain works in coordination with quality, sales and finance to arrive the right process for handling returns and distributor claims.
Supply chain works collaboratively with all the functions. It connects seamlessly with Sales, marketing, finance, manufacturing, quality, corporate affairs, legal, engineering, R&D, Packaging Development and many others to collaborate and achieve the organization objectives.
9. Risk identification and mitigation:
Supply chain identifies the various types of risk like capacity constraints. Transportation constraint. Supplier capacity constraints and work on them proactively to address all the constraints to keep supply pipeline running.
Automation in supply chain processes reduce labor costs, improve productivity, reduce inventory, streamline warehousing operations, and reduction in overhead costs associated with inventory storage, rent, labor and energy costs.
In nutshell, supply chain offers many benefits to the organization and this is function with many opportunities to make companies more lean, efficient and effective.
It is the function of future which will deliver superior competitive advantage to the business.
Q3. What are key challenges in supply chain function
Supply chain function has stretch targets and daily challenges. Various challenges are as follows:
1.Dynamic Problems and situations:
First challenge is inherent variability in consumer behavior which is dependent upon multiple factors like economy, Income levels, competitors, advertising and other factors.
Estimating demand accurately is tedious job and sometimes not always in organization control. So, with any change in demand entire supply pipeline has to be changed to align to new demand.
This creates challenge in terms of capacity constraints, excess or short inventory, transportation constraints and vehicle detentions which make managing supply chain more complex and a challenging job with every changing nature of problems
2. Demanding Customers:
Customers are demanding and always looking for perfect availability, timely delivery and best quality of service.
Excellent service level is required for build strong customer satisfaction.
3. Rising Costs:
With any variation in demand and supply, cost start increasing. Supply chain targets are to deliver year on year cost savings.
SCM controlled costs are material cost which are dependent on commodity suppliers, transportation cost dependent on global fuel prices and warehousing costs
4. Keeping workforce Engaged:
Supply chain team face daily challenges. They need to be self-motivated so as not to get discouraged and always look forward to overcome the challenges.
SCM professional needs to be courageous, optimistic and ready to face challenge and overcome them.
Leadership needs to provide strong guidance and support, led by example and get involved in day to day responsibilities.
Teams need to be recognized and appreciated for their contributions to keep their morale high.
5. Rigor in execution:
Supply chain requires rigor in execution. Success in supply chain roles depend upon how things are executed properly and good execution requires effective leadership of large teams and hands on job approach.
Not everyone is inclined to hands on and deep involvement in the job which can be a hindrance for effective accomplishment of objectives. Planner or logistics person need to be on their toes all the time for solve the daily challenges
6. Behaviour challenges:
Influence without authority:
Supply chain has to coordinate with multiple functions and stakeholders to get things done which don’t fall under direct control of supply chain. Strong personal credibility is important to get things done from others
End to end ownership:
Supply Chain often has to push others to do their work to deliver the end results. Therefore, they need to take full ownership.
Solving the problems and resolving the issues is important in a supply chain function.
Q4. What are supply chain costs?
Costs which are managed and controlled by SCM function are covered under supply chain costs:
Value of material procured from suppliers. It can be direct material cost Raw Materials and Packaging Materials which directly go inside the production or indirect cost like services etc. to support the operations.
Expenses incurred in managing warehousing operations for materials and finished goods which includes, facility rent, operating expenses like fixed manpower, loading and unloading charges, stationery and miscellaneous expenses
Cost of moving goods from one location to another which includes material transportation from suppliers to factories, Primary transportation from factories to distribution centers and secondary transportation from distribution centers to distributors and retailers
4. Inventory Cost :
Cost of carrying inventory which is opportunity cost of inventory value, holding and storage cost.
5. Obsolescence Cost :
Material which is obsolete due to expiry before consumption, change in product recipes or storage and transit damages.
6. People Cost :
Cost of people working in supply chain function for the organization
Supply chain function may account for 30-40% of organization total cost primarily led by material costs.
Q5. What is the difference between logistics and supply chain?
Logistics includes warehousing, transportation and import-export activities.
Supply chain includes end to end activities from procurement of materials to delivery of finished goods to the customers. Key subfunctions are Sourcing, planning and logistics.
Hence, Logistics is a subset of Supply chain function.
Q6. Who are supply chain partners?
Supply chain of a firm cannot work in isolation. It works collaboratively with other supply chain partners to deliver the goals.
Supply chain partners are as follows:
Suppliers are manufacturers of Raw Materials, Packaging Materials and other materials and services
2. Warehousing operator:
Third party warehouse partner who manages warehousing operations including unloading of goods, stock management and dispatch and invoicing process.
Labor is required to do unloading and loading which is often provided by another third-party labor contractor. Pest control Services is responsible for maintaining proper hygiene and ensuring good housekeeping and security is hired for safety of warehouse operations
3 .Transportation operator:
Third party operator responsible for vehicle placement and delivery for both primary (factory to distribution centers) and secondary (distribution centers to retailers) type of transportations.
4. Distributor/ Retailers:
Customers of supply chain. They play and important role that goods reach to consumers in good condition and as per demand requirement
5. IT solutions provider:
There are many Information technology solutions provider who provide services to automate the supply chain. For example, Transportation Management systems, Warehouse Management system, auto replenishment system and planning tools.
Q7 . What is a good supply chain?
A good supply chain is the one which delivers the promise of service, quality and cost to its customers.
It adds value at every step of value chain and builds efficiency and effectiveness in the organization
It increases sales, improve profitability, optimize working capital and deliver superior competitive advantage to the business.
It is led by strong and competent leadership supported by an engaged team.
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