SCM is defined as combination of art and science that goes into improving the way your company find the raw components that needs to make a product or services and deliver it to customer. In Business word this art and science become functions that an organization undertake. SCM for IT Systems that support manufacturing managers in making decisions that optimize the trade off between capital tied up in stocks and inventories, versus the ability to deliver goods at prices and delivery dates agreed with customers. In principle and reality, both inwards logistics operations to acuire materials to make products and outwards logistics operations shipping finished goods to final customers are monitored. WHAT EACTLY IS SUPPLY CHAIN MANAGEMENT O! WHAT IS BASIC COMPONENT O" SCM# !s per Supply"Chain #perations $eference"model %SC#$&'&'(()* which has been developed by Supply"Chain Council. +his model organized and focused on the five primary management ,. PLAN -. SOU!CE .. MA$E /. %ELI&E! 0. !ETU!N ,. P'(n1 +his is vital part of SCM philosophy, where the companies normally need to make strategy for managing all the resource that go towards fulfilling the customer demand for the product and services that they offers. ! big piece of planning is developing a set of matrices to monitor the Supply chain so that it would be efficient, cost effective and deliver high uality and value to the customer. -. Sour)e1 It means processes that procure goods and services to meet planned or actual demand. +his part of SCM consists of selecting right suppliers that will deliver the good and services that need to create your product. 2eveloping a set of pricing, delivery and payment process with supplier is important. !lso this will also take care of managing the inventory of goods, and services you receive from your suppliers, including receiving shipping, verifying them, transferring them into various facilities and authorizing supplier payment. .. M(*e1 +his is basically a step where your company starts fulfilling the reuest or B3I4+ for products into finished state to meet planned or actual demand. Schedule activity necessary for production, testing, packaging and preparation for delivery. /. %e'iver1 +his is also called 4ogistic 5rocess. +his is the processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management. 0. !e+urn " +his is real pain of SCM model, which defined as processes associated with returning or receiving returned products for any reason. +ypical model can be best described as1 WHO IS THE STA$EHOL%E! O" SUPPLY CHAIN +hese are considered as stake holder of SCM1 Customers 6our Company 2esign 5artners Material Suppliers Contract Manufacturers 4ogistic 5roviders WHAT A!E %!I&E!S O" THE SUPPLY CHAIN# +hese are the main drivers 1 5roduction Inventory 4ocation +ransportation Information ,- Pro.u)+ion +his driver addressing these uestions1 what products does the market want7 8ow much of which products should be produced and by when7 +his activity includes the creation of master production schedules that take into account plant capacities, workload balancing, uality control, and euipment maintenance. /- Inven+or0 +his driver addressing these uestions1 9hat inventory should be stocked at each stage in a supply chain7 8ow much inventory should be held as raw materials, semi finished, or finished goods7 +he primary purpose of inventory is to act as a buffer against uncertainty in the supply chain. 1- Lo)(+ion +his driver addressing these uestions1 9here should facilities for production and inventory storage be located7 9here are the most cost efficient locations for production and for storage of inventory7 Should e:isting facilities be used or new ones built7 #nce these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer. 2- Tr(ns3or+(+ion +his driver addressing these uestions1 8ow should inventory be moved from one supply chain location to another7 !ir freight and truck delivery are generally fast and reliable but they are e:pensive. Shipping by sea or rail is much less e:pensive but usually involves longer transit times and more uncertainty. 4- Infor5(+ion +his driver addressing these uestions1 8ow much data should be collected and how much information should be shared7 +imely and accurate information holds the promise of better coordination and better decision making. 9ith good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it. GET "AMILIA! WITH TOP ,6 TE!MS7 %E"INITIONS AN% TE!MINOLOGY IN SCM M(s+er %e5(n. S)8e.u'e 9 M%S +he M2S is a consolidation of demand by product and time bucket M(s+er Pro.u)+ion S)8e.u'e9 MPS +he M5S is a statement of supply reuired to meet the demand for the items contained in the M2S. +he master production schedule defines the anticipated build schedule for all products. +he master production schedule also provides the basis for order promising %!+5* function M(+eri(' !e:uire5en+s P'(n9M!P +he Material reuirements planning %M$5* calculates net reuirements from gross reuirements by evaluating1 +he master schedule Bills of material Scheduled receipts #n"hand inventory balances 4ead times #rder modifiers A.v(n)e. Su33'0 C8(in P'(n9 ASCP Constrained Based and optimized version of M$5 P'(nne. Or.er !utomatically suggested action from planning engine Consu53+ion +he process of ;relieving; the forecast to prevent double counting of demand %ro3 S8i3 8aving an order ship directly from the vendor to the customer without physically being in your inventory. &en.or M(n(;e. Inven+or09 &MI +he process of giving the vendor the authority and visibility to determine what your inventory should be Cus+o5er Owne. Inven+or09 COI 9here you are managing the customers inventory on your premises and supply as reuired 9ork #rder<Sales #rder +he reuest that you received from the customer for fulfilling there demand. SIMPLE PLANNING CYCLE WITHIN AN O!GANI<ATION ! typical planning cycle would start by loading the sales orders, forecast and other demand such internal orders into the master demand schedule %M2S*. +hat demand statement would then be used as the schedule that drives the Master 5roduction Schedule %M5S* . +ake a note in regular M$5 implementations the M5S is used as the schedule for !+5. #nce the M5S is reviewed and updated is used as the schedule to drive the M$5 process. +he result of the M$5 process is planned orders and e:ception messages. 9hen released from M$5 the planned orders for ;buy; items become reuisitions or purchase orders in the purchasing module and the ;make; items become discrete =obs in the 9ork In 5rocess Module. #nce the finished goods are received into inventory it is shipped to satisfy customer orders. S)en(rio I :S('es Or.er 9 "ore)(s+ P'(nnin; C0)'e +his is the scenario where normally we are building to stock and satisfying sales order demand from stock. 8ere you will see the difference as planned orders are released to become purchase reuisitions for components and work orders for sub assemblies and finished goods. +he finished goods are then shipped to satisfy the sales orders.
S)en(rio II : P'(nnin; 9 Pro)ure5en+ C0)'e In the 5lanning" 5rocurement cycle we normally start where the first part of the planning cycle is complete and we have a planned order for a buy item from M$5. +he planned order is released and becomes a reuisition or purchase order in the purchasing module. ! purchase order is then created from the reuisition and sent to the vendor. +he vendor would supply the materials. +he materials would be received into inventory and the purchase order would be closed.
S)en(rio III :P'(nnin; 9 %ro3 S8i3 C0)'e In the 2rop Ship cycle the process is as follows1 ! sales order is received from the customer. !fter the sales order is entered a process is run that creates a purchase order that matches the sales orders +he item, uantity and reuired date information on purchase order matches that information on the sales order. +he ship to address on the purchase order is the ship to address of the customer. +he vendor ships the product directly to your customer. #nce the vendor ships the product you receive; the purchase order and that creates the shipping transaction to satisfy the sales order. Matching accounting transactions complete the process S)en(rio I& :P'(nnin; 9 WIP C0)'e In the 9ork In 5rocess cycle after the planning cycle is complete a planned order is released to create a discrete =ob. Material<components is issued the =ob or back flushed from inventory. +he =ob is completed from 9ork In 5rocess to Inventory. S)en(rio & : P'(nnin; 9 Ou+si.e Pro)essin; C0)'e 9ith #utside 5rocessing you could be buying a service, an item or capacity from an outside vendor. +he setup for each of these scenarios will be described in the training sessions to follow, however they all follow a similar process. ! routing with an outside processing operation is setup. !fter the planning cycle is complete a planned order is released to create a discrete =ob. #nce the 2iscrete =ob is moved to a outside processing operation, a purchase reuisition is triggered. +he reuisition is imported to 5urchasing and a purchase order is created. +he details of the discrete =ob such as =ob number, assembly number and uantity is tied to the purchase order. +he purchase order is sent to the vendor. 9hen the purchase order is received its destination will be shop floor and the assembly will be returned to the ne:t operation on the work order. +his make an end of this discussion.