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Article by: Alvis Lazarus, Supply Chain Consultant
“In this article we are going to discuss about what is supply chain management??”
Here, you are going to find out what is really getting managed within a supply chain. There are three different things that we manage in supply chain, the product, the cash and the information. So, let me consider a day to day example and see how this happens. Let me consider an example of a biscuit.
I want to have a biscuit. I shall reach a Kirana store or a petty shop, pay the desired amount and get a pack of biscuit. It is a very simple activity, however, to get you the biscuit many stakeholders within the supply chain manage a set of complex activities. The key ingredients are flour, butter and sugar. The manufacturer procures these ingredients from the respective suppliers. The manufacturer then converts these ingredients to the finished product that is the biscuit. The pack of biscuits goes to the distributor and from the distributor it goes to the retailer (Kirana store or Petty shop). The customer walks in, pays the money and gets the biscuit.
The first activity that you are managing is the product, that moves from left to right. The path of the product is supplier, manufacturer, distributor, retailer and finally to the customer. The second thing is cash. The supplier, manufacturer, distributor and the retailer are earning money by doing a set of activities. They are basically earning the profit. The customer is going to fund for all the activities in the supply chain. When the customer pays for the product the shop owner is going to take his profit and pay the remaining amount to the distributor. The distributor takes the profit and pays the rest amount to the manufacturer. The manufacturer keeps his margin and pays the rest to the supplier for the ingredients that were supplied to him.
So, the cash flow in the supply chain is from the right to the left. One exception in the movement of the product from left to right is reverse logistics. Suppose a product has been written off, in that case the product move from right to the left. The last part is the information flow which is two-ways.
“Product, information and cash are the three things that gets managed in the supply chain.”
These three factors are very crucial and when managed well the supply chain can ensure the highest level of satisfaction to the customer.