Supply Chain Management - Process Flow
Supply chain management can be defined as a systematic flow of materials, goods, and related information among suppliers, companies, retailers, and consumers.
There are three different types of flow in supply chain management −
- Material flow
- Information/Data flow
- Money flow
Let us consider each of these flows in detail and also see how effectively they are applicable to Indian companies.
Material flow includes a smooth flow of an item from the producer to the consumer. This is possible through various warehouses among distributors, dealers and retailers.
The main challenge we face is in ensuring that the material flows as inventory quickly without any stoppage through different points in the chain. The quicker it moves, the better it is for the enterprise, as it minimizes the cash cycle.
The item can also flow from the consumer to the producer for any kind of repairs, or exchange for an end of life material. Finally, completed goods flow from customers to their consumers through different agencies. A process known as 3PL is in place in this scenario. There is also an internal flow within the customer company.
Information/data flow comprises the request for quotation, purchase order, monthly schedules, engineering change requests, quality complaints and reports on supplier performance from customer side to the supplier.
From the producer’s side to the consumer’s side, the information flow consists of the presentation of the company, offer, confirmation of purchase order, reports on action taken on deviation, dispatch details, report on inventory, invoices, etc.
For a successful supply chain, regular interaction is necessary between the producer and the consumer. In many instances, we can see that other partners like distributors, dealers, retailers, logistic service providers participate in the information network.
In addition to this, several departments at the producer and consumer side are also a part of the information loop. Here we need to note that the internal information flow with the customer for in-house manufacture is different.
On the basis of the invoice raised by the producer, the clients examine the order for correctness. If the claims are correct, money flows from the clients to the respective producer. Flow of money is also observed from the producer side to the clients in the form of debit notes.
In short, to achieve an efficient and effective supply chain, it is essential to manage all three flows properly with minimal efforts. It is a difficult task for a supply chain manager to identify which information is critical for decision-making. Therefore, he or she would prefer to have the visibility of all flows on the click of a button.