Supply chain cycles
StoryBoard Audio Supply chain cycles
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer request.
Introduction to Supply Chain cycles
Supply Chain cycle is a complex proceure which begins with the collcetion of rawmaterials from different suppliers and ends up with delivery of product to the final customer. Have you ever thought of the origin of the items which you are buying fom a retail outlet? The manufacturer collects the raw materials from different suppliers and after manufacturing, the product is delivered to warehouse and from there it transports to the retail outlets like wall mart. Wall-mart then, store the goods in their warehouse and they release the product according to customer demand.
The above case states that a typical supply chain may involve a variety of stages. These supply chain stages include: Customers, Retailers, Wholesalers/Distributors, Manufacturers, Component/Raw material suppliers.
Cycle view of Supply Chain
As we have seen supply chain management involves various stages in supplying the products from supplier’s supplier to customer. At each stage they perform certain function. The function between two successive stage is called a cycle. Each successive stage has one cycle and totally there are four important cycles. They are Customer order cycle, Replenishment cycle, Operation cycle, Sourcing/Procurement cycle.
Customer Order Cycle
The Customer Order Cycle sits at the interface between the customer and retailer and includes all processes for receiving and filling of customer orders: customer arrival, order entry, fulfilment, and receipt.
This is the physical arrival of the customer at the retail outlet and makes the decision regarding the purchase. The customer arrival can be by physical presence at the retail outlet, through a telephone call or through an online order. The supply chain activities begin with the customer order.
Customer order entry
The term customer order is that process that customers informing the retailer what products they want to purchase and the retailer allocating products to customers. At a supermarket, order entry may take the form of customers loading all items that they intend to purchase onto their carts. At a mail order firm’s telemarketing centre or Web site, order entry may involve customers informing the retailer of the items and quantities they selected.
Customer Order Fulfilment
This is the process which ensures that the customers demand is being served. In a super market or a general store this is done by the customer himself and in the case of online order or mail order transactions the receiving firm picks the order from inventory, packaging it, and shipping it to the customer.
Customer Order Receiving
During this process, the customer receives the order and takes ownership. Records of this receipt may be updated and payment completed. At a supermarket, receiving occurs at the checkout counter. For a mail order firm, receiving occurs when the product is delivered to the customer.
The inventory replenishment is an operation that consists in making the stock full again in order to avoid stock-out. Replenishment cycle happens at the retailer or distributor levels and involves the replenishment of the stock with them. For instance when a super market runs on low stock for a particular item on the rack, it will take measures to fill the same to meet the future demand. This cycle may include Retail order trigger, Retail order entry, Retail order fulfilment, Retail order receiving.
Retail order trigger
Retailers have the direct contact with the customer and he is responsible to meet the customer demand in time and when he fulfils the customer demand the inventory will become depleted. During this phase the retailer generates an order which will replenish the depleted stock which is supposed to be passed on to the distributor or manufacturer.
Retail order entry
This is the transfer phase, which ensures that the order generated at the replenishment trigger phase is transferred to the manufacturer or distributor to refill the stock.
Retail Order Fulfilment
This is the process which ensures the fulfilment of the order for replenishment. The objective of this process is to make sure the availability of required inventory on the retail outlet.
Retail Order Receiving
This is the receiving phase of the inventory. When the stock arrived at the retailer as per the order he has to receive it physically after checking and verification. Once confirmed the stock has to be replaced and update all the inventory records.
The Manufacturing Cycle is found between a manufacturer or repair activity and the next downstream member of the supply chain. This next downstream member may be a wholesaler, a retailer, or the customer. The cycle begins when a customer, retail activity, or wholesaler places a replenishment order, or when a manufacturer forecasts customer demand. Processes in this cycle include production and maintenance scheduling, and product repair, shipping, and receiving.
The processes involved in the manufacturing cycle are the following:
- Order arrival from the finished-goods warehouse, distributor, retailer or customer
- Production scheduling.
- Manufacturing and shipping
- Receiving at the distributor, retailer, or customer
During this process, a finished-goods warehouse or distributor sets an order trigger based on the forecast of future demand and current product inventories. The resulting order is then conveyed to the manufacturer. In some cases the customer or retailer may be ordering directly from the manufacturer. In other cases a manufacturer may be producing to stock a finished-products warehouse.
During the production scheduling process, orders are allocated to a production plan. Given the desired production quantities for each product, the manufacturer must decide on the precise production sequence.
Manufacturing and Shipping
During the manufacturing phase of the process, the manufacturer produces to the production schedule. During the shipping phase of this process, the product is shipped to the customer, retailer, distributor, or finished-product warehouse. The objective of the manufacturing and shipping process is to create and ship the product by the promised due date while meeting quality requirements and keeping costs down.
In this process, the product is received at the distributor, finished-goods warehouse, retailer, or customer and inventory records are updated. Other processes related to storage and fund transfers also take place.
The Procurement Cycle occurs between the manufacturer and supplier. It includes all processes to ensure the availability of materials and components at the time and place required in the production and maintenance schedule. These processes include supplier production scheduling and component manufacturing, shipping, and receiving.
The cycle is triggered by requirements of the manufacturer’s production schedule, the maintenance activity’s repair schedule, or the restocking policy. This cycle may repeat several times between several tiers of suppliers.
Steps in Procurement Cycle
Steps in procurement cycle can be categorized based on need recognition, specific need, supplier selection, price and terms, purchase order. The selection of the supplier is again based on delivery, expediting, receipt and inspection of purchases, invoice approval and payment and record maintenance.