Supply Chain Management Concepts

The Seven Rights of Fulfillment

1. The ability to meet customer requirements,

2. And that means doing it right the first time – no mulligans, no mistakes are
allowed.
3. In the quest to provide quality service and satisfy customers- Rights of
Fulfillment.
4. A “perfect order” delivery is only attained when all Seven Rights of
Fulfillment are achieved. To accomplish a perfect order fulfillment, the
seller has to have your preferred product available for order, process your
order correctly, ship the entire order via the means that you request, provide
you with an advanced shipping notification and tracking number, deliver the
complete order on time and without damage, and bill you correctly.
5. A seller’s ultimate goal is to make the customer happy by doing the job
right, which gives them a good reason to use the seller’s services again in the
future.

The Processes

1. Planning – the plan process seeks to create effective long- and short-range
supply chain strategies. From the design of the supply chain network to the
prediction of customer demand, supply chain leaders need to develop
integrated supply chain strategies.
2. Procurement – the buy process focuses on the purchase of required raw
materials, components, and goods. As a consumer, you're pretty familiar
with buying stuff!

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3. Production – the make process involves the manufacture, conversion, or
assembly of materials into finished goods or parts for other products. Supply
chain managers provide production support and ensure that key materials are
available when needed.
4. Distribution – the move process manages the logistical flow of goods
across the supply chain. Transportation companies, third party logistics
firms, and others ensure that goods are flowing quickly and safely toward
the point of demand.
5. Customer Interface – the demand process revolves around all the issues
that are related to planning customer interactions, satisfying their needs, and
fulfilling orders perfectly.

Principles

 Principle 1: Segment customers based on the service needs of distinct

groups and adapt the supply chain to serve these segments profitably.
 Principle 2: Customize the logistics network to the service requirements and
profitability of customer segments.
 Principle 3: Listen to market signals and align demand planning accordingly
across the supply chain, ensuring consistent forecasts and optimal resource
allocation.
 Principle 4: Differentiate product closer to the customer and speed
conversation across the supply chain.
 Principle 5: Manage sources of supply strategically to reduce the total cost
of owning materials and services.
 Principle 6: Develop a supply chain-wide technology strategy that supports
multiple levels of decision making and gives clear view of the flow of
products, services, and information.
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  Principle 7: Adopt channel-spanning performance measures to gauge
collective success in reaching the end-user effectively and efficiently.

Advantages
1. Control costs by adopting a wider approach to whole life costing
2. Improve internal and external standards through performance
assessments.
3. Comply with environmental and social legislation
4. Manage risk and reputation
5. Build a sustainable supply chain for the future
6. Involve the local business community

Procurement planning
1. Sourcing & supplier selection
2. Contracting
3. Monitoring & evaluation
4. Expediting & follow up
5. Disposal

Step 1: Need Recognition

The business must know it needs a new product, whether from internal or external
sources. The product may be one that needs to be reordered, or it may be a new
item for the company.

Step 2: Specific Need

The right product is critical for the company. Some industries have standards to
help determine specifications. Part numbers help identify these for some

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businesses. Other industries have no point of reference. The company may have
ordered the product in the past. If not, then the business must specify the necessary
product by using identifiers such as color or weight.

Step 3: Source Options

The business needs to determine where to obtain the product. The company might
have an approved vendor list. If not, the business will need to search for a supplier
using purchase orders or research a variety of other sources such as magazines, the
Internet or sales representatives. The company will qualify the suppliers to
determine the best product for the business.

Step 4: Price and Terms

The business will investigate all relevant information to determine the best price
and terms for the product. This will depend on if the company needs commodities
(readily available products) or specialized materials. Usually the business will look
into three suppliers before it makes a final decision.

Step 5: Purchase Order

The purchase order is used to buy materials between a buyer and seller. It
specifically defines the price, specifications and terms and conditions of the
product or service and any additional obligations.

Step 6: Delivery

The purchase order must be delivered, usually by fax, mail, personally, email or
other electronic means. Sometimes the specific delivery method is specified in the
purchasing documents. The recipient then acknowledges receipt of the purchase
order. Both parties keep a copy on file.

Step 7: Expediting

Expedition of the purchase order addresses the timeliness of the service or

materials delivered. It becomes especially important if there are any delays. The
issues most often noted include payment dates, delivery times and work
completion.

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Step 8: Receipt and Inspection of Purchases

Once the sending company delivers the product, the recipient accepts or rejects the
items. Acceptance of the items obligates the company to pay for them.

Step 9: Invoice Approval and Payment

Three documents must match when an invoice requests payment - the invoice
itself, the receiving document and the original purchase order. The agreement of
these documents provides confirmation from both the receiver and supplier. Any
discrepancies must be resolved before the recipient pays the bill. Usually, payment
is made in the form of cash, check, bank transfers, credit letters or other types of
electronic transfers.

Step 10: Record Maintenance

In the case of audits, the company must maintain proper records. These include
purchase records to verify any tax information and purchase orders to confirm
warranty information. Purchase records reference future purchases as well.
Finally, the existence of a defined procurement strategy and the value outcomes –
 the improved economic impacts
 compliance with national and international sustainability standards and
regulations
 to have a better understanding of risks in the supply chain
 contributes to the sustainable organisational strategy
 better commercial/economic decisions from understanding of issues that
impact on the procurement decision
 potential benefits in innovation, better materials, alternatives, technical
advice, and emerging technologies
 helps build a sustainable platform and achieve savings year on year
 better quality of purchasing staff with more satisfying goals and improved
performance
 more effective evaluation of proposals and bids
Basic supply management
1. Appreciate what a supply chain is and what it does
2. Define the different organizations that participate in any supply chain
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 3. Discuss ways to align your supply chain with your business strategy
4. Start an intelligent conversation about the supply chain management issues
in your company/ law firm.
Companies in any supply chain must make decisions individually and collectively
regarding their actions in five areas: Drivers of Supply Cain
 Production—what products does the market want? How much of which
products should be produced and by when? This activity includes the
creation of master production schedules that take into account office
capacities, workload balancing, and quality control
 Inventory—what inventory should be stocked at each stage in supply chain?
How much inventory should be held as raw materials, semi-finished, or
finished goods? The primary purpose of inventory is to act as a buffer
against uncertainty in the supply chain. However, holding inventory can be
expensive, so what are the optimal inventory levels and reorder points?
 Location—where should facilities for production and inventory storage be
located? Where are the most cost efficient locations for production and for
storage of inventory? Should existing facilities be used or new ones built?
Once these decisions are made they determine the possible paths available
for product to flow through for delivery to the final consumer.
 Transportation—how should inventory be moved from one supply chain
location to another? Air freight and truck delivery are generally fast and
reliable but they are expensive. Shipping by sea or rails much less expensive
but usually involves longer transit times and more uncertainty. This
uncertainty must be compensated for by stocking higher levels of inventory.
When is it better to use which mode of transportation
 Information—how much data should be collected and how much
information should be shared? Timely and accurate information holds the
promise of better coordination and better decision making. With 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.