Function Involved in Supply Chain Management


Planning focuses on future. It is based on certain facts, some assumptions, and forecasts. In the context of supply chain management, the planning is to be done for strategic decisions such as import policy, foreign exchange availability, credit squeeze, inventory for working capital, working out delivery schedules etc. The major categories of planning following in an organization are:

Capacity Planning 

The objective is to review, understand bottleneck, balancing of capacities and know utilization level in the manufacturing system.

Material Requirement Planning 

This is the scientific way to determine the requirement of raw material, components, spares and other items that go into manufacturing the finished goods. Macro/ external factors which affect the material planning are price trends, business cycle, government policies, taxations etc. At micro / internal level the affecting factors are organization's objective and policies, plant capacity utilization, rejection rates, lead times, inventory levels, working capital, seasonality of product etc. Normally MRP is done for quarterly basis.

Sales Planning

Prepared on basis contract and commitment with customers, past trends. And future predictions with market assumptions. Sales plans are driving document for production and material planning.

Production Planning

Production Planning is done on the basis of sales plan and material availability. The modern manufacturing currently improved the cycle-time reduction, set-up time reduction, inventory reduction, reducing the rejection level with zero defect concept, improving the material yield, etc.

Distribution Planning

It is a very critical aspect of FMCG industries to ensure availability of products all the time. In this aspect coordinate warehousing, logistics and sales management part. Few strategies adopted by supply chain professional are make-or-buy, outsourcing, and SCM specialized software.

Purchasing and Procurement

A manufacturing spends nearly 50% of its revenue in purchasing, that's why company cost and profits are greatly affected by them. Obviously, any saving achieved by it results in direct saving for the company and all such savings are company's profit. Purchasing provides input for the organization to convert into an output. They must be available at a proper time, proper quantity, proper place, and proper price. In general management parlance, the objectives of purchasing are:

  1. To support company operation with an uninterrupted flow of materials and services
  2. To buy competitively and wisely
  3. To help keep a minimum inventory
  4. To develop a reliable alternate source of supply
  5. To develop good vendor relationship and good continuing supplier relationship
  6. To achieve minimum integration with other departments
  7. To train and develop highly competent personnel
  8. To develop policies and procedures which permit accomplishment of preceding 7 objectives at the lowest reasonable operating cost.

Types of purchasing

• Forward buying
• Tender buying
• Strategic buying
• System contracting
• Rate contract
• Blanket order

Purchasing step or system:

1. Get REQUIREMENTS (NEEDS) from user department
2. Send the INQUIRY to the vendors
3. Get the QUOTATION from vendors
4. Make comparative statement
5. Negotiate, fix the price and terms and conditions
6. Place the PURCHASE ORDER to the right vendor
7. Follow up with vendors
8. Receipt and Inspection
9. Storage and Record Keeping
10. Invoice & Payment

Stores Management

Store is a place where all types of materials are stored. The organization of stores consists the following step:
1. Identification and grouping of work
2. Defining and delegating responsibility and authority
3. Establishing structural relationship so as to ensure efforts are coordinated

The objective of stores:
1. To services the operative function in the most of economical manner
2. Ensuring uninterrupted service to production by the continuous material availability
3. Maintaining the value of materials
4. The accuracy of stock available
5. Services to user departments
6. Establishing coordination with other departments
7. Time actions on non-moving, slow-moving, and obsolete stock
8. Generating MIS

The main function of stores
1. Identification of materials
2. Receipt of materials
3. Storage
4. Inspection
5. Material verification, stocktaking
6. Issues from stores
7. Protection of materials
8. Inventory controls
9. MIS / reports

Scientific stores should have following features:
1. Location of stores, considering
○ Proximity to user department
○ Security consideration
○ Type of material being stored
○ Ease of transport
○ Good material control
○ The scope of future expansion
2. Layout of stores
3. Use of IT
4. Classification & codification of materials
5. Preservation of materials
6. Use of material handling equipment
7. Physical verification of stocks
8. Visible store management

Inventory Control

Inventory is defined as the stock of materials in the organization at a various stage, it might be a finished good, raw material, packaging material, work in process, consumable, engineering spare parts which is to be kept in stock. It is said inventory is nothing but money in kind.

Inventory management is essential to keep supply chain costs low. The strategic role of inventory is to reduce the gap between supply and demand. However excessive inventory adds to unproductive costs. Depending upon the desired service level, lead time and the demand variability an optimum level of safety stock can be decided.

Type of inventories:
• Raw material and components
• Packaging materials
• Spares and stores
• Consumable and other miscellaneous items

The organization holds inventory for two main reasons, to reduce cost and improve customer service. The common perception and experience are that supply chain leads to cost savings, largely through a reduction in inventory (and transportation). To develop cost-effective logistic strategy, an organization must understand the nature of product demand, inventory cost and supply chain capabilities.

Organization use one of three approaches to manage inventory:

  1. Most retailers use an inventory control approach, monitoring inventory levels by items
  2. Manufacturer are typically more concerned with production scheduling and use flow management to manage inventories
  3. The producer who's processing raw materials or in extractive industries usually do not actively manage inventories

Inventory Analysis


The warehouse is providing a proper environment for storing goods and materials, as well as supplying the product to the customer just in time. Here's the contemporary development in warehousing:
• Distribution Requirement Planning (DRP)
• Barcoding
• Electronic Data Interchange (EDI)


From the place of procurement to the place of consumption, Logistic is the management of the flow of goods between the point of origin and the point of consumption in order to meet customer's requirement. The logistics of physical item usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The minimization of the use of the resource is a common motivation in logistics for import and export.

Logistic management refers to designing, developing, producing, and operating an integrated system which responds to customer expectation by making available the required quantity with required quality when required to offer best possible customer service at the least possible cost. 

The major features of logistic management are:
1. It ensures a smooth flow of all types of goods such as raw material and finished goods
2. It has the ability to meet customer expectation and requirement of good
3. It ensures delivery of quality product
4. It is an integration of various management functions for optimization of resources
5. It enhances profitability and productivity

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