Supply Chain Decision phases

Supply Chain Decision phases – SCM Blog-03

Here we are learning about supply chain Decision phases : The decision phase is defined as the various steps involved in supply chain management to take action or decisions related to certain products or services. Successful supply chain management can be understood in three decision stages. We need information to decide on the flow of product and money. Here we cover the three main decisions involved in the entire process of supply chain, which we will discuss step by step.

Supply Chain Strategy 

In this phase, Supply Chain Decision phases are mostly taken by management. It involves the decision to consider classes such as long-term forecasting and includes the price of goods that would be very expensive if they were wrong. At this stage it is very important to study the market conditions.
These decisions consider the current and future market conditions. They include the structural layout of the supply chain. After the layout is ready, each task and duties are determined. All strategic decisions are taken by the higher authority or senior management. These decisions include deciding to build materials, factory space, which allows transporters to load materials and their
Makes it easy to dispatch to the specified location. It includes a warehouse and space for storage along with the entire product and goods, and several items.

Supply Chain Planning 

Supply chain planning should be done according to the demand and supply point of view. To understand the demands of customers, a market research should be done. The second thing to consider is the awareness and updated information about the competitors and strategies used by them to meet their customer’s demands and requirements.

As we know, different markets have different demands and should be dealt with from a different point of view. This phase encompasses all this, starting with forecasting market demand to which markets the finished goods will be provided, which plants are planned in this phase. All the participants or employees involved with the company as much as the whole process
Efforts should be made to make it as flexible as possible.

The Supply Chain Decision phases is considered successful if it performs well in short-term planning.

Supply chain Operation 

The third and final Supply Chain Decision phases consists of various functional decisions that must be made immediately within minutes or hours or days. The purpose behind this decision phase is reducing uncertainty and performance optimization.

Starting with handling customer orders to supply the customer with that product, this stage covers everything. For example, imagine a customer demanding an item manufactured by your company. Initially, the marketing department is responsible for taking the order and forwarding it to the production department and the inventory department.

The production department then responds to the demand of the customer by sending the demanded item to the warehouse through the appropriate order and the distributor sends it to the customer within the time limit.
All departments engaged in this process are required to work with the aim of improving performance and reducing uncertainty.

SCM – Performance Measures 

Supply chain performance measurement can be defined as an approach to judge the performance of a supply chain system. Supply Online performance measures can be broadly classified into two categories.
  • Qualitative measures: for example customer satisfaction and product quality.
  • Quantitative measures: for example, order-to-delivery lead time, supply-response time, flexibility, resource utilization, distribution performance.
Here we will only consider quantitative performance measures. Supply chain display This can be improved by using a multi-dimensional strategy which suggests that the company needs to provide services to various customer demands.

Quantitative Measures 

The measures taken to measure most performance may be somewhat similar, but the purpose behind each section is very different from the other.
We can divide quantitative measures of supply chain performance into two types. They are:
  • Non-financial measures 
  • Financial measures 
Non-financial measures: Metrics for non-financial measures include cycle time, customer service level, inventory level, resource utilization, flexibility, and quality. In this section, we will discuss the first four dimensions of metrics:

Time cycle 

Cycle time is often called lead time. It can be defined as an end-to-end delay in a business process. For a supply chain, cycle time can be defined as the business processes of interest, the supply chain process, and the order-to-delivery process. In cycle time, we must learn two types of lead times. They are as follows:
  • Supply chain lead time 
  • Order-to-delivery lead time 
Order-to-delivery lead time is defined as the delay time between the placement of an order by the customer and the delivery of products to the customer.
If the item is in stock, it will be the same as the delivery lead time and order management time. If the ordered item needs to be produced, it will be a summary of supplier lead time, manufacturing lead time, delivery lead time, and order management time.
Supply chain process lead time is defined as the time taken by the supply chain to convert raw materials into final products,
As well as the time required to access the products at the customer’s destination address so it includes supplier lead time, manufacturing lead time, delivery lead time and logistics lead time for transportation of raw materials from suppliers to plants in and out of intermediate storage points Included for shipment of semi-finished / finished products.
Leading time in supply chains is intercepted at the interface because of the interface between suppliers and manufacturing plants, between suppliers and manufacturing plants, distributors and retailers, and many others.
Lead time compression is an important topic to discuss due to time competition and the association of lead time with inventory level, cost and customer service level.

Customer service level 

Customer service levels in the supply chain are characterized by the operation of several unique performance indices. We have three measures to demonstrate here. They are as follows:
  • Order Filling Rate: Order filling rate is part of customer demands that can be easily satisfied with available stock. For this part of customer demands, there is a need to consider supplier lead time and manufacturing lead time. Order filling rates can be in relation to a central warehouse or field warehouse or stock at any level of the system.
  • Stock out Rate: This is the inverse of the order fill rate and marks the portion of an order lost due to a stock out.
  • Backorder Level: This is yet another measure, a gauge of the total number of orders waiting to be filled.
Possibility of on-time delivery: This is the part of customer orders that are completed in a timely manner, that is, within the agreed date.
To maximize customer service levels, it is important to maximize the order fill rate, minimize the stock out rate, and reduce the backorder level.

Inventory levels 

Since the total cost of inventory-carrying costs has increased significantly, it is necessary to carry sufficient inventory to meet customer demands. In the supply chain system, inventory can be further divided into four categories.
  • raw material
  • In the process, ie the incomplete and half-finished section
  • finished goods inventory
  • spare parts
Each list is organized for a different reason. It is necessary to maintain the optimal level of each type of list. Therefore estimating the actual inventory level will provide a better scenario of system efficiency.

Resource utilization 

In supply chain networks, a huge variety of resources are used. The different types of resources available for different applications are mentioned below.
  • Manufacturing resources: Include machines, material handlers, equipment, etc.
  • Storage resources: Combine warehouses, automated storage and recycling systems.
  • Logistics resources: attach trucks, rail transport, air-cargo carriers, etc.
  • Human resources: consisting of labor, scientific and technical personnel
  • Financial resources: include working capital, stock etc.
In the resource utilization paradigm, the main ideal is to efficiently use all assets or resources to maximize customer service levels, minimize lead times, and optimize inventory levels.

Financial measures 

Measures taken to assess various fixed and operational costs related to the supply chain are considered financial measures.
Finally, the main objective to be achieved is to maximize revenue by maintaining low supply chain costs.  The prices have increased due to inventory, transport, facilities operating technology, materials and labor.
The financial performance evaluation of the supply chain is usually done by considering the following issues:
  • Raw material cost.
  • Revenue from goods sold.
  • Activity-based costs such as material handling, manufacturing, rates To collect, etc.
  • Inventory holding cost
  • Transportation costs
  • Cost of perishable goods
  • For incorrectly filled or late orders to customers penalty
  • For incorrectly filled or late delivery from suppliers credit
  • Cost of goods returned by customers
  • Credit for goods returned to suppliers

In short, we can say that the financial performance index can be merged as one using important modules such as activity-based costing, inventory costing, transportation costing and inter-company financial transactions.

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