Management Activities

Purchasing

Most organizations include purchasing as a major supply chain activity. Because purchasing is the central focus of this book, there is no need to provide more detail here.

Inbound Transportation

Larger organizations usually have a specialized traffic and transportation function to manage the physical and informational links between the supplier and the buyer. For some organizations, transportation is the single largest category of single costs, especially for highly diversified organizations. Although a firm may have minimal common purchase requirements among its operating units, there usually are opportunities to coordinate the purchase of transportation services.

Quality Control

Quality control has taken on increased importance during the last fifteen years. Almost all organizations recognize the importance of supplier quality and the need to prevent, rather than simply detect, quality problems. The emphasis has shifted from detecting defects at the time of receipt or use to prevention early in the materials sourcing process. Progressive organizations work directly with suppliers to develop proper quality control procedures and processes.

Demand and Supply Planning

Demand planning identifies all the claims (or demand) on output. This includes forecasts of anticipated demand, inventory adjustments, orders taken but not filled, and spare-part and aftermarket requirements. Supply planning is the process of taking demand data and developing a supply, production, and logistics network capable of satisfying demand requirements.

Receiving, Materials Handling, and Storage

All inbound material must be physically received as it moves from a supplier to a purchaser. In a non-just-in-time environment, material must also be stored or staged. Receiving, materials handling, and storage are usually part of the materials management function because of the need to control the physical processing and handling of inventory. Receipts from users indicating that services have been performed are also run through receiving to trigger invoice payment.

Materials or Inventory Control

The terms “materials control” and “inventory control” are sometimes used interchangeably. Within some organizations, however, these terms have different meanings. The materials control group is often responsible for determining the appropriate quantity to order based on projected demand and then managing materials releases to suppliers. This includes generating the materials release, contacting a supplier directly concerning changes, and monitoring the status of inbound shipments. Materials control activities are sometimes the responsibility of the purchasing department, particularly in smaller organizations.

The inventory control group is often responsible for determining the inventory level of finished goods required to support customer requirements, which emphasizes the physical distribution (i.e., outbound or downstream) side of the supply chain. Integrated supply chain management requires that the materials and inventory control groups coordinate their efforts to ensure a smooth and uninterrupted flow to customers.

Order Processing

Order processing helps ensure that customers receive material when and where they require it. Problems with order processing have involved accepting orders before determining if adequate production capacity is available, not coordinating order processing with order scheduling, and using internal production dates rather than the customer’s preferred date to schedule the order. Order processing is an important part of supply chain management—it represents a link between the producer and the external customer.

Production Planning, Scheduling, and Control

These activities involve determining a time-phased schedule of production, developing short-term production schedules, and controlling work-in-process production. The production plan often relies on forecasts from marketing to estimate the volume of materials that are required over the near term. Because operations is responsible for carrying out the production plan and meeting customer order due dates, order processing, production planning, and operations must work together closely.

Warehousing/Distribution

Before a product is shipped to the customer, it may be stored for a period in a warehouse or distribution center. This is particularly true for companies that produce according to a forecast in anticipation of future sales. Increasingly, as companies attempt to make a product only after receiving a customer order and information systems become more sophisticated, this part of the supply chain may become less important.

Shipping

This activity involves physically getting a product ready for distribution to the customer. This requires packing to prevent damage, completing any special labeling requirements, completing the required shipping documents, and/or arranging transportation with an approved carrier. For obvious reasons, shipping and outbound transportation must work together closely.

Outbound Transportation

Fewer organizations “own” the transportation link to their customers, compared with just a few years ago. Increasingly, full-service transportation providers called third party logistics providers (3PLs) are designing and managing entire distribution networks for their clients. Firms operating in this space include familiar names such as UPS, DHL, CH Robinson, and Ryder.

Customer Service

Customer service includes a wide set of activities that attempt to keep a customer satisfied with a product or service. The three primary elements of customer service are pretransaction, transaction, and post-transaction activities.