Supply Chain Management

Introduction

We are pleased that you contacted Strategic Procurements regarding the improvement of your hospitals logistics and supply chain. This briefing is meant to provide you with information regarding modern Supply Chain Management techniques, describe the essential components of a typical supply chain management process, and provide you with recommendations for logistics strategies.

Definition of Supply Chain Management

The supply chain is all activities associated with the movement and production of raw materials into products through to the end user or customer, including all information associted with the product and sales. Supply Chain Management can be defined as "the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage." (Supply Chain Resource Consortium, 2006). It can also be defined as " the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers." (CIO. COM, 2006)

Therefore we can further define it as the study and control of all the processes associated with manufacturing and distributing a product or service to a customer, to include the analysis and planning of the processes.

Components of Supply Chain Management

Supply Chain Management generally consist of distinct components as described below:

* Planning - This phase analyzes the entire lifecycle of the product. It starts with the initial order from the customer and ends with the final disposition of returned or defective products. This phase determines the overall strategy and defines the metrics by which success is measured.

* Sourcing - This phase identifies the sources of raw materials used in the manufacturing of products or services. Establishing a supply network that is consistent in the delivery of raw materials is key to this phase.

* Manufacturing - This phase is where production schedules are established, product is manufactured, and inventory strategies are established.

* Delivery - This phase consists of the loading and shipping of products to the customer. This phase would coordinate the receipt of orders from the customer, determine warehouse needs and locations, select carriers for delivery of product to customers, and invoice customers to receive payment.

* Network Return Management - This phase handles the return and disposition of defective products from the customer. It also can provide support to customers who have problems with delivered products.

Logistics Strategies

Logistics planning concepts are derived from the unique nature of logistics activities, especially transportation, and are used to formulate strategies for logistics implementation. Below are six concepts for logistics strategy formulation:

* Total Cost Concept - This strategy is one of trade-offs. It is recognized that different activities within the organization are often at conflict with one another. This is managed by balancing the activities so that they are collectively optimized. This means that although one activity, or source may be advantageous on its own merits, will not necessarily be optimal for the firm in the overall analysis, and therefore will be traded-off for something more collectively optimal.

* Differentiated Distribution - Not all products should be given the same level of customer service. This is to say that not all products should be distributed to the customer in the same manner. Some items may ship to high volume customers directly from the plant in bulk, while others would be served from warehouses.

* Mixed Strategy - "A mixed distribution strategy will have lower costs than a pure, or single strategy." (Ballou, 1999). This strategy allows for an optimal mix of strategies for different product groups.

* Postponement - This strategy is to delay the shipping of goods until a demand has occurred and also to delay the creation of the final form of the finished product until a demand is there.

* Consolidation - This strategy is the concept of creating large shipments from smaller ones to reduce the cost of transportation.

* Standardization - Variety of products increase inventories and decreases shipment sizes. Standardization can take