SCM Awareness: Functions and Flows in a Supply Chain.

Innovative Planning, Superior Results.

SCM Awareness: Functions and Flows in a Supply Chain.

Supply Chain Management Functions and flows

Some of our clients have asked for information on the basics of Supply Chain Management for their staff with the aim of making their entire organisation familiar with the fundamentals of the Supply Chain. This is important because there is hardly a department in a company that is not in some way part of or impacted by the supply chain. We have prepared information and presentations for them and will share some of this here in a series of articles over the next few weeks.

Functions and flows in a supply chain?

So as we saw in the previous post, far from being simple and straight forward your supply chain will be very complex both internally and externally. It is not just your company. At the very least it includes your suppliers and your customers. But is also includes the suppliers of your supplier. And suppliers and customers of your customer.  For example if another supplier lets down your customer they may have to change or delay their order with you.  Or if your customer’s customer suddenly places an unforecasted order they will have to place a rush order on you. 

And it builds and builds. Depending on the supply chain and it’s complexity you could have more of a matrix of companies than a supply chain.  Again just think of the device in front of you and how many complex parts it has.  So is it an impossible task?  No. Because there are some basic principals you can apply.  Mainly around common functions and managing the flows.

So what are the functions in a supply chain?  Some years ago I did a Masters in Supply Chain Management. One of our lecturers, Edward Sweeney, summarized it very well by breaking it down in 5 main areas (if you want to read more you can find some of his books on Amazon).  

  • Buy – This involves how you deal with your suppliers.
  • Make – This is telling the factory what to make and making sure they follow the plan.
  • Store – This is involves inventory. How much to hold, where and for how long.
  • Move – This is Logistics. This is the part of Supply Chain Management everyone knows because they see the trucks on the road and the ships on the sea.  But someone needs to arrange and coordinate all this.
  • Sell – This involves how you deal with your customers.  Different companies have different approaches to how much contact there will be between customers and planning but in my experience the best supply chains will have detailed and rapid methods of communication between the customer and planning.
Supply Chain Management Functions
Supply Chain Management Functions

Once you understand this then Supply chain management basically integrating these functions closely together. And we can also look at them in some of the more common terms you will hear in business, Supplier Relationships (or procurement), Operations, Warehousing, Logistics and Customer Service. 

The key to good planning and supply chain management is managing the flows through through and between these various functions.  There are three main flows in any supply chain.

The most obvious one is Product.  From Farm to Fork.  The product will physically move from its original raw material stage to the finished good the customer buys.

The next one is the flow of money.  This makes sure that every stage of the process gets paid a fair and equitable amount in return for their involvement.  After all if the business isn’t profitable for all then eventually the chain breaks.   Money flows back from the customer through the supply chain.

The third flow is the flow of information.  This flows both ways up and down the supply chain and is arguably the most important of all the flows.  Without accurate and timely information the supply chain cannot operate efficiently.

Supply Chain Management Functions and flows
Supply Chain Management Functions and flows

So that is a very wide overview of the supply chain.  Next we will zoom in on the key focus of this course. The Production or Manufacturing area.