Business Process in SCM

Following are the typical business that connects various elements in the SCM:

• Product Development
  
• Order Fulfillment
  
• Demand Management
  
• Customer Relationship Management
• Procurement Process
  

1. Product Development Process

As customer demands are ever increasing with respect to quality, delivery and options, organizations are increasingly finding it difficult to meet the customer’s expectations. It is often noted that customers want:

• Faster delivery
  
• Least price
  
• 0 % rejection rate

And as customer’s preference keeps changing, organizations are forced to reduce the product development lead-time as well as costs. Organizations are increasingly employing the following strategies in the Product Development Process:

• Integrate customers and suppliers early in the development process
  
• Reduce time to market
  
• Incorporate supply chain considerations into product design
• Employ Concurrent Product Development Practices

2. Order Fulfillment Process

Organizations need to deploy appropriate production systems depending on the Product and demand environment in which they operate. Main objectives, which need to be considered, are:

• Production must shift from a supply/ push method of operation to a demand / pull method based on customer needs.
  
• Manufacturing process must flexibly respond to market changes with rapid changeover possibilities for mass customizations.
  
• Minimum lot sizes are planned to move toward a make to order environment.
  
• Required delivery dates rather than EOQ drive production priorities.
  
• Specific supply strategies are developed for each customer segment.
  
• Customer needs dates and requirements drive the process.
  
• Manufacturing, distribution and transportation plans are integrated.
  

Organizations can employ following Production Typologies to accomplish the above objectives:

a. Manufacturing process Choices

Considering the demand for the items, range of products, product design, equipment, material movement, etc., manufacturing process choices can be categorized as follows :

• Lot/Batch/Intermittent
  
• Flow Line / Repetitive / Continuous
  
• Project
  

Lot/Batch/Intermittent: In the batch / intermittent process, goods are produced in batches / lots. Work centers are generally organized into groups / departments having the similar equipment and skills. Ex., all milling machines in one group, all Lathe machines in one group etc.

These work centers can perform a variety of operations due to the different machine’s and skills present and hence are capable of producing different products.

The products move along the various machines in the work centers based on the required operations to be performed on them. These work centers hence comprise of general purpose machinery with the flexibility of making a variety of products.

Control of work is managed through the individual work centers for each lot.

Flow Line / Repetitive / Continuous: In a flow line / repetitive / continuous manufacturing process, workstations are organized in the sequence needed to make the product. The product moves from one work station to the next along the defined sequence at an almost constant rate.

If the products are discrete ex., automobiles, Refrigerators etc., the process is called repetitive manufacturing process. If the products are not discrete ex., gasoline, oils etc. the process is called continuous manufacturing process.

• The repetitive / continuous manufacturing process has the following characteristics:
  
• Setting up of a flow line is justified only if the demand of the product is large enough.
  
• Only a limited range of products can be produced in each flow line
  
• The work stations comprise of specialized machinery and tooling required for the product
  
• Since the flow of products between the work stations is balanced and is nearly constant, there is a minimal build up of work in process inventory.
  

Project: The Project manufacturing process choice is applicable to huge complex projects. In most cases, the product is developed at a particular location with all the necessary resources and equipment moving to the product development location. Large aircrafts, ship building and construction are examples.

b. Production Environments

On-Time Delivery is one of the key attributes in meeting customer expectations. To cater to the varying needs of different customers, operations must device the required production environment / strategy which will help in minimizing the lead times.

Production environment can be classified into

• Design / Engineer to Order
  
• Make to Order
  
• Assemble / Package to Order
  
• Make to Stock
  

Design / Engineer - to - Order: ETO environment caters to specific customers’ requirements. The process starts with the preparation of unique / highly customized engineering designs of the product, with the close involvement of the customer.

After the designs are finalized, required material is purchased and the components and subassemblies are manufactured. Its during this process that inventories, mostly work in process are maintained. The goods are then assembled and shipped to the customer.

Hence the total delivery lead time that has to be optimized in this environment to provide a faster customer service include

Make - To - Order: In this environment, the final product is made after the receipt of the customer order. Standard components are purchased / manufactured and are usually stocked as raw material inventory.

On receipt of customer orders, the product is made from these standard components and the process may include minor customizations of the design.

The main activities contributing to the delivery lead time in this environment include the manufacturing time, assembling time and shipping.

Assemble / Package - To - Order: In this environment, the standard components and sub-assemblies are manufactured and stocked in the form of component / sub-assembly inventories.

On the receipt of the customer orders, these standard components / sub-assemblies are assembled according to the configurable options specified by the customer. There is no design and product manufacturing activity involved and hence the delivery lead time includes the time to assemble and ship.

Make - To - Stock: In this environment, the products are completely manufactured and the finished goods are stocked as end item / finished goods inventory. On the receipt of customer orders, the goods are packed andshipped to the customers and hence the delivery lead time in this environment comprises of only the shipping time.

3. Demand Management Process

Organizations have to forecast demand accurately. This will result in

• Synchronized flow of products and materials to customer demand
  
• Reduction of variability
  

Organizations should combine accurate demand forecasting with marketing plans, inventory management and sales projections to gain an advantage over the competitors.

Better demand management process utilizes information resources to reduce costs, improve customer service and tap into hidden value throughout the supply chain. In this process customer demand is continuously gathered, complied and renewed in order to match the organization’s supply capability with the requirements of the market.

The process has the following main objectives:

• Demand requirements and Supply capabilities are continuously modeled using point of sale and “key” customer demand data.
  
• Market requirements and production plans are coordinated on an enterprise-wide basis.
  
• Multiple sourcing and routing options are considered at the time of receipt of the order.
  
• Demand and production rates are synchronized and inventories need to be managed.
  

4. Customer Relationship Management Process

Organizations should maximize customer service as a means of providing focused point of contact for all customer enquiries in order to insulate them from the complexity of a large, multi-divisional corporation. Main objectives of a Customer Relationship Management processes are:

• Customer service provides a single source of customer information, a point of contact for administration of the product / service agreement.
  
• Instant promising / availability information is available for the customer
  
• On-line/real-time access to product and pricing information assists customers with quick order placement.
  
• On-line/real-time access to order status information is available to support customer order enquiries.
  

5. Procurement Process

Organizations maintain relationships with major suppliers, which are corporately managed; in strategic alliances while purchase order transactions become simplified and integrated with supply process. Main objectives of an efficient Purchase Process are:

• Strategic plans of suppliers and organization are aligned to focus on resources on holding down costs and developing new products.
  
• Supplier categorization and management is implemented on a corporate global basis, with purchasing in a strategic contracting role.
  
• Purchase Order transactions are integrated with supply process to improve productivity and all areas of supplier performance.