Every organization needs to manage the resources they have to get the optimal level of benefit from them. The planning process helps to determine the customer demand and the sources required for fulfilling the requirements . It enables the supply chain managers to arrange the sources timely and make them available to start the production with available supply.
On-time supply is vital to enhance the confidence of the customer. It is also essential to improve relationships with vendors. In the planning process, multiple departments work together to forecast raw materials, work in process and finished goods products.
Some people take procurement and sourcing in the same context, but there is a difference between these terms. Sourcing is part of the procurement process, and the entire process makes the supply chain management successful.
Procurement is a process to acquire all the materials used to complete the product’s production process. It includes everything used in the manufacturing process, from raw material to packing material.
This process starts with purchase planning to get quotations, price negotiations, order placement, order confirmation, and follow-up until the goods arrive on the company premises. After receiving goods, the suppliers will acquire the payment. They are also the ones responsible within the procurement department.
Generally, the sourcing process occurs before the procurement department purchases. The primary purpose of sourcing is to find reliable and quality suppliers capable of supplying goods as per demands with specific delivery times and quality required. The primary focus of sourcing remains on the balance of quality and affordability of the vendors’ goods.
This process comprises testing the quality of goods, gathering information about suppliers, the time required by suppliers to deliver the goods, minimum quantity to place the order, and the supplier’s capacity.
Usually, people argue that the sourcing process is essential to get the goods at the lowest price. But in actuality, it is used to make a perfect balance between quality and price.
Production planning is making the plan to get the maximum output from the available resources. The primary purpose of production planning is to deliver the product within the appropriate time frame . Also, it helps to keep the quality of the product as per standard.
Typically, organizations have to manufacture multiple products on the same plant and provide various customers with supplies. Therefore, it is essential to prioritize production as per the time limit and capacity of production.
Adequate resource allocation for every production line is vital to ensure quality standards. In production planning, sales and production departments collaborate by keeping in view the historical data and expected sales volume.
Inventory management is the most crucial section of supply chain management and my personal favorite! In this section, you have to tackle inventory from raw material, work in process (WIP) and finished goods.
Managing inventory allows organizations to find the optimal amount of raw materials required to complete future orders.
Any shortage of any raw material causes a delay in delivery that does not positively affect customers. It is also essential to maintain the optimum level for finished products to handle the expected orders demand level. Furthermore, effective inventory management helps to avoid the risk of excessive stock levels and overage inventory long-term.
The warehouse is the storage place of goods for various purposes. These goods could be in the shape of raw material, finished product, or semi-finished product. However, the primary purpose of a warehouse is to reduce the transportation cost and maintain service levels. For example, every organization needs a warehouse to store its products, and sometimes they need multiple warehouses.
Managing warehouses at different locations reduces the overall costs of delivering products to customers for that area. Warehouses also are beneficial to keep the goods for a long time to benefit from increased prices. Companies also can use warehousing to manage proper inventory levels.
Logistics is the process of transporting goods from one place to another. It involves both raw materials and finished products. The logistics department is responsible for delivering the products to customers as per the schedule and handles the shifting of finished products to warehouses at different locations.
Usually, the logistic department also generates invoices for customers, receives payments, and serves the returning products. This department works with a fleet of vehicles for shipping purposes. Many large organizations hire logistic service providers to handle this department, especially when it comes to sensitive handling.