Setting Up Your Supply Chain Strategy

When you are part of a supply chain or are in charge of managing one, it is important to have an effective supply chain strategy by which you perform all transactions between each link in the chain. What are the important aspects of the supply chain strategy that you should consider in putting together a control system?

Who are all the parties?

In any supply chain, you’ll have several links, all of whom must be satisfied with the outcome of their own individual transactions. None of them are concerned with what happened prior to their link in the chain, and none care nearly as much about the transactions that take place later down the line, as long as clients are happy. Therefore, it is your job to know who is being dealt with at which stage of the game, and you have to be certain that all are content with the proceedings. That includes the manufacturer, the supply house, the representatives, the distributors, the transportation agents, and the end users.

What is the time frame for completion?

Of course, your supply chain strategy has to have a time management card in the deck. Everyone at each stage wants prompt service, and this usually means that they need their supplies “yesterday”. It is your job to route out a strategy that delivers everything in a timely, fast, efficient manner while maintaining quality of products and services. Building a precise schedule that all parties adhere to is essential in creating a regimental process that doesn’t crack under pressure. In order for that to succeed, however, your tightly planned schedule must also have a small amount of wiggle room for extenuating circumstances.

Packaging, labeling, and shipment must be accurate.

There are several areas in which delivery could go wrong, causing problems with the next link in the chain. All product labeling and packaging must be clear and concise, and the process of creating these packages and labels must be carefully adhered to in order to assure that there are no mislabels or improper packaging leading to the shipment of the wrong product to the wrong source. Computerization of this process will eliminate some danger, but human error can always occur. It is best to have a process in place of double- and triple-checking each item that is being shipped to reassure that nothing is incorrect.

Tracking the flow of supplies down the chain is vital.

Only tracking the products to find out if your scheduling requirements are being met and all links in the chain are satisfied with their service will tell you if your supply chain strategy has been successful. Getting feedback from all sources from the top of the chain to the bottom will assist you in knowing where adjustments must be made to increase efficiency and time management. It will also help you to identify which suppliers are the most proficient in meeting your delivery needs and time constraints so that you can narrow down the number of people with which you must consult in order to keep the flow of supplies moving swiftly.

By the Dictionary: The Definition of Supply Chain Management

Supply chain management by definition involves the entire supply chain, from the supplier out to the manufacturer, followed by the use of the retailer and then the final customer. In order to be efficient in supply chain management, you must meet three primary goals involving levels of inventory, speed of the transaction, and efficiency in sales. We’ll look at how you can achieve success in each of these areas separately.

Reduction of Inventory

While it is necessary to keep a certain amount of product on hand to satisfy the needs of customers, both commercial and consumer, you need to maintain a balanced view of how much is too much. If you have a lot of extra bulk in your inventory, you run several risks. First of all, it cuts into your net worth, showing as excess stock that is not moving. Also, large quantities of stock mean that some of it could become outdated or even expire, if any of it is perishable. Keeping the minimum amount of stock necessary increases your bottom line and reduces waste. It also allows you to provide a greater number of products and respond more quickly, aiding in meeting the next goal of good supply chain management.

Speed of Transaction

In supply chain management, you must be concerned with response time to all customers within the chain. Keeping a smaller amount of inventory will allow you the ability to more carefully monitor the stock, providing you with the ability to more quickly search and find what is needed for a customer. This enables you to exchange data with each customer along the line in real time, getting them the answers they need immediately. Another way to assure that you can respond quickly to requests is to use an inventory management system that helps you keep a tight watch on the coming and going of items in your warehouse. You can quickly index the answers required straight from the system and guarantee that you are providing the customer with the proper feedback. Once you can get the information to the customer with ease, you should consider what they need in return, bringing us to the final goal of effective supply chain management.

Sales Efficiency

The best way to assure that you can make the most of every sale with each customer or client in your supply chain is to effectively meet the needs of these customers. After you provide them with quick, accurate information, listen to what they require and find a way to implement changes that make your speedy response and tightly controlled inventory more efficient for their needs. Perhaps there is a specific product they need to order in certain quantities on a regular basis; in this case, you can ease their concerns by setting up automatic shipments of such items.

Most importantly, in depth knowledge of your inventory and the needs of your customers will help you in implementing effective supply chain management. The key to success is catering to the needs of all sources along the way, including yourself.

Familiarizing Yourself With Supply Chain Logistics

Whereas supply chain management is concerned with the effectiveness of supplying product to customers down the line from the original production, supply chain logistics starts much sooner in the process. In order to be effective in managing your supply chain, you may want to familiarize yourself with the aspects of supply chain logistics as well.

Logistics management involves the planning and implementation of a marketing scheme, as well as the flow and storage of goods throughout the entire supplier process. Sourcing and procurement are part of the logistics process, meaning that you must determine from where the inventory and supplies you intend to provide to others are going to come to you. The logistics management process also include the planning and scheduling of any orders, deliveries, shipping, and other transportation needs of the supplies along the chain. Let’s break it down from the beginning.

• Source – Once a source of goods is determined, you must secure a relationship with this supplier. For your part, this usually means being set up as some sort of distributor or representative that will act as a go-between from the source to the next step in the supply chain.
• Fleet – You will need to set up transportation needs for shipment of the goods that you intend to manage within your inventory. This could be provided from several directions. The source may have a means of shipment, your company may have an in-house transportation department, or you could outsource this work to a transportation or delivery company.
• Warehousing – Once you have the goods, supply chain logistics management requires that you have somewhere to put it. This means having sufficient warehouse space and an organized inventory system into which items can be placed. An inventory management software system and proper labeling and bin placement are vital to controlling the flow of the supply chain.
• Order Fulfillment – In order to complete this aspect of supply chain logistics, there are several requirements to keep in mind. You must have a strategy for taking orders, a process by which these orders are pulled and properly packaged for shipment, a plan for delivery, and a means of tracking the outgoing product so that you can replenish stock as necessary.
• Coordination – All aspects of the supply chain logistics process must integrate seamlessly, meaning that you must carefully coordinate the processes to make the flow of supplies from one area to the next efficient and smooth. Without careful planning, it is quite easy for one aspect of the chain to fail and several customers to be disappointed.
• Customer Service – This is probably the most important part of supply chain logistics, as it affects every step along the way. Regardless of the stage of the transaction or supply process, every customer that is dealt with wants to receive assistance in the fastest, most efficient way possible, with a willing and smiling individual helping them through their part of the transaction. No matter who you are working with, be certain to provide a pleasant front and always strive to achieve the goals of the customer.

Inventory Management: Definition Of Inventory Management

Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.

Other definitions of inventory management from across the web:

• Involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check.


• Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status.


• Handles all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc.


• Management of the inventories, with the primary objective of determining.controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock holding and handling costs.


• In business management, inventory consists of a list of goods and materials held available in stock.


• An inventory can also be a self examination, a moral inventory.

Special Inventory Management Tips For Manufacturers

Inventory Management Tips

If you are in the business of bidding, specifications play a very important role. In writing specifications, the followingelements should be considered.

• Do not request features or quality that are not necessary for the items' intended use.
• Include full descriptions of any testing to be performed.
• Include procedures for adding optional items.
• Describe the quality of the items in clear terms.

The following actions can help save money when you are stocking inventory:

• Substitution of less costly materials without impairing required quality;
• Improvement in quality or changes in specifications that would lead to savings in process time or other operating savings;
• Developing new sources of supply;
• Greater use of bulk shipments;
• Quantity savings due to large volume, through consideration of economic order quantity;
• A reduction in unit prices due to negotiations;
• Initiating make-or-buy studies;
• Application of new purchasing techniques;
• Using competition along with price, service and delivery when making the purchase selectiondecision.

More Online Information on Inventory Management

Tips For Better Inventory Management

Inventory Management Tips:

At time of delivery:

• Verify count -- Make sure you are receiving as many cartons as are listed on the delivery receipt.
• Carefully examine each carton for visible damage -- If damage is visible, note it on the deliveryreceipt and have the driver sign your copy.
• After delivery, immediately open all cartons and inspect for merchandise damage.When damage is discovered
• Retain damaged items -- All damaged materials must be held at the point received.
• Call carrier to report damage and request inspection.
• Confirm call in writing--This is not mandatory but it is one way to protect yourself.
• Carrier inspection of damaged items
• Have all damaged items in the receiving area -- Make certain the damaged items have not movedfrom the receiving area prior to inspection by carrier.
• After carrier/inspector prepares damage report, carefully read before signing.

After inspection:

• Keep damaged materials -- Damaged materials should not be used or disposed of without permissionby the carrier.
• Do not return damaged items without written authorization from shipper/supplier.
  
  More Online Information on Inventory Management

Developments In Inventory Management

In recent years, two approaches have had a major impact on inventory management:

• Material Requirements Planning (MRP) and
• Just-In-Time (JIT and Kanban).

Their application is primarily within manufacturing but suppliers might find new requirements placed on them and sometimes buyers of manufactured items will experience a difference in delivery. Material requirements planning is basically an information system in which sales are converted directly into loads on the facility by sub-unit and time period. Materials are scheduled more closely, thereby reducing inventories, and delivery times become shorter and more predictable.

Its primary use is with products composed of many components. MRP systems are practical for smaller firms. The computer system is only one part of the total project which is usually long-term, taking one to three years to develop.

Just-in-time inventory management is an approach which works to eliminate inventories rather than optimize them. The inventory of raw materials and work-in-process falls to that needed in a single day. This is accomplished by reducing set-up times and lead times so that small lots may be ordered. Suppliers may have to make several deliveries a day or move close to the user plants to support this plan.

More Online Information on Inventory Management

Inventory Management Control: Controlling Your Inventory

To maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establish adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control. They are listed below, from simplest to most complex.

• Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items.
• Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of the inventory is counted every so many days on a regular basis.
• Click sheet control enables the manager to record the item as it is used on a sheet of paper. Such information is then used for reorder purposes.
• Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item that was sold.

As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence of computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer.

Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action.
Off-line point-of-sale terminals relay information directly to the supplier's computer who uses the information to ship additional items automatically to the buyer/inventory manager.

The final method for inventory control is done by an outside agency. A manufacturer's representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise is removed from stock and returned to the manufacturer through a predetermined, authorized procedure.

A principal goal for many of the methods described above is to determine the minimum possible annual cost of ordering and stocking each item. Two major control values are used:

• the order quantity, that is, the size and Page 4 frequency of orders; and
• the reorder point, that is, the minimum stock level at which additional quantities are ordered.

The Economic Order Quantity (EOQ) formula is one widely used method of computing the minimum annual cost for ordering and stocking each item. The EOQ computation takes into account the cost of placing an order, the annual sales rate, the unit cost, and the cost of carrying inventory. Many books on management practices describe the EOQ model in detail.


More Online Information on Inventory Management

Inventory Management The Purchasing Plan

One of the most important aspects of inventory control is to have the items in stock at the moment they are needed. This includes going into the market to buy the goods early enough to ensure delivery at the proper time. Thus, buying requires advance planning to determine inventory needs for each time period and then making the commitments without procrastination.

For retailers, planning ahead is very crucial. Since they offer new items for sale months before the actual calendar date for the beginning of the new season, it is imperative that buying plans be formulated early enough to allow for intelligent buying without any last minute panic purchases. The main reason for this early offering for sale of new items is that the retailer regards the calendar date for the beginning of the new season as the merchandise date for the end of the old season. For example, many retailers view March 21 as the end of the spring season, June 21 as the end of summer and December 21 as the end of winter.

Part of your purchasing plan must include accounting for the depletion of the inventory. Before a decision can be made as to the level of inventory to order, you must determine how long the inventory you have in stock will last. For instance, a retail firm must formulate a plan to ensure the sale of the greatest number of units. Likewise, a manufacturing business must formulate a plan to ensure enough inventory is on hand for production of a finished product.

In summary, the purchasing plan details:

• When commitments should be placed; ! When the first delivery should be received;
• When the inventory should be peaked;
• When reorders should no longer be placed; and
• When the item should no longer be in stock.

Well planned purchases affect the price, delivery and availability of products for sale.

More Online Information on Inventory Management

Successful Inventory Management

Successful inventory management involves balancing the costs of inventory with the benefits of inventory. Many small business owners fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of money tied up in inventory. This fine line between keeping too much inventory and not enough is not the manager's only concern.

Others include:

• Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin;
• Increasing inventory turnover -- but not sacrificing the service level;
• Keeping stock low -- but not sacrificing service or performance.
• Obtaining lower prices by making volume purchases -- but not ending up with slow-moving inventory; and
• Having an adequate inventory on hand -- but not getting caught with obsolete items.

The degree of success in addressing these concerns is easier to gauge for some than for others. For example, computing the inventory turnover ratio is a simple measure of managerial performance. This value gives a rough guideline by which managers can set goals and evaluate performance, but it must be realized that the turnover rate varies with the function of inventory, the type of business and how the ratio is calculated (whether on sales or cost of goods sold).

Average inventory turnover ratios for individual industries can be obtained from trade associations.

More Online Information on Inventory Management

Introduction To Inventory Management

Introduction To Inventory Management

"Inventory" to many small business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products.

Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts money into the cash register. In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. In fact, many small businesses cannot absorb the types of losses arising from poor inventory management. Unless inventories are controlled, they are unreliable, inefficient and costly.

More Online Information on Inventory Management