THE USE OF SUPPLY
CHAIN MANAGEMENT IN MANUFACTURING ORGANISATION TO CONTROL INVENTORY LEVELS
WHILE PROVIDING ADEQUATE SERVICE TO CUSTOMERS; A CASE STUDY OF EASTWIND FOODS
ABSTRACT
The
research provides an appraisal of the use of supply chain management in
manufacturing organization to control inventory levels while providing adequate
service to customers.
It
elucidate supply chain management, inventory control and determine inventory
levels required to ensure customer satisfactory service.
INTRODUCTION
Supply-chain
management and it encompasses all of those integrated activities that bring
product to market and create satisfied customers. The Supply Chain Management Program integrates topics from manufacturing
operations, purchasing, transportation, and physical distribution into a
unified program. Successful supply chain management, then, coordinates and
integrates all of these activities into a seamless process. It embraces and
links all of the partners in the chain. In addition to the departments within the
organization, these partners include vendors, carriers, third party companies,
and information systems providers Within the organization, the supply chain
refers to a wide range of functional areas. These include Supply Chain
Management-related activities such as inbound and out bound transportation,
warehousing, and inventory control. Sourcing, procurement, and supply management
fall under the supply-chain umbrella, too. Forecasting, production planning and
scheduling, order processing, and customer service all are part of the process
as well. Importantly, it also embodies the information systems so necessary to
monitor all of these activities. Simply stated, the supply chain encompasses all of those activities associated with moving
goods from the raw-materials stage through to the end user.”
Advocates
for this business process realized that significant productivity increases
could only come from managing relationships, information, and material flow
across enterprise borders. One of the best definitions of supply-chain
management offered to date comes from Bernard J. (Bud) La Londe, professor
emeritus of Supply Chain Management at Ohio State University. La Londe defines
supply-chain management as follows: “The delivery of enhanced customer and economic value through synchronized
management of the flow of physical goods and associated information from
sourcing to consumption. “As the “from sourcing to
consumption” part of our last definition suggests, though, achieving the
real potential of supply-chain management requires integration not only of
these entities within the organization, but also of the external partners. The
latter include the suppliers, distributors, carriers, customers, and even the
ultimate consumers. All are central players in what James E. Morehouse of A.T.
Kearney calls the extended supply chain. “The goal of the extended
enterprise is to do a better job of serving the ultimate consumer,”.
Superior service, he continues, leads to increased market share. Increased
share, in turn, brings with it competitive advantages such as lower warehousing
and transportation costs, reduced inventory levels, less waste, and lower
transaction costs.
The customer is the key to both
quantifying and communicating the supply chain’s value, confirms Shrawan Singh,
vice president of integrated supply-chain management at Xerox.
“If you can start measuring
customer satisfaction associated with what a supply chain can do for a customer
and also link customer satisfaction in terms of profit or revenue growth,”
Singh explains, “then you can attach customer values to profit & loss
and to the balance sheet.”
The best companies around the world are
discovering a powerful new source of competitive advantage. It’s called
supply-chain management and it encompasses all of those integrated activities
that bring product to market and create satisfied customers.The Supply Chain Management Program
integrates topics from manufacturing operations, purchasing, transportation,
and physical distribution into a unified program. Successful supply chain
management, then, coordinates and integrates all of these activities into a
seamless process. It embraces and links all of the partners in the chain. In
addition to the departments within the organization, these partners include
vendors, carriers, third party companies, and information systems providers.
CHAPTER 1
1.1
BACKGROUND
OF THE STUDY
The fundamental objective of supply chain management is to “add value”.
An
example is the fish fingers. During
the Supply Chain Management ’98 conference in the United Kingdom , a
participant in a supply chain management seminar stated that total time from
fishing dock through manufacturing, distribution, and final sale of frozen fish
fingers for his European grocery-products company was 150 days. Manufacturing
took a mere 43 minutes. That suggests an enormous target for supply chain
managers. During all that time, company capital is– almost literally in this
case–frozen. What is true for fish fingers is true of most products. Examine
any extended supply chain, and it is likely to be a long one. James Morehouse,
a vice president of consulting firm A.T. Kearney, reports that the total cycle
time for corn flakes, for example, is close to a year and that the cycle times
in the pharmaceutical industry average 465 days. In fact, Morehouse argues that
if the supply chain, of what he calls an “extended enterprise,” is
encompassing, everything from initial supplier to final customer fulfillment,
could be cut to 30 days, that would provide not only more inventory turns, but
fresher product, an ability to customize better, and improved customer
responsiveness. “All that add value,” he says. And it provides a
clear competitive advantage. Supply Chain Management becomes a tool to help
accomplish corporate strategic objectives reducing working capital, taking
assets off the balance sheet, accelerating cash-to-cash cycles, increasing
inventory turns, and so on.
1.2 STATEMENT OF
THE PROBLEM
The problem confronting the research is to appraise the use of supply
chain management in manufacturing organization to control inventory levels
while providing adequate service to customers; A case study of east wind foods.
1.3 RESEARCH QUESTION
1
What is supply chain management
2
What is inventory level and how can supply chain management be used to control inventory while providing
adequate service to customers
1.4 OBJECTIVE OF
THE STUDY
1
To appraise the nature of supply
chain management.
2
To determine the use of supply chain management to control inventory
level while providing adequate service
to customer
1.5 SIGNIFICANCE OF
THE STUDY
The study shall analyze supply chain
management and project its importance in controlling inventory level while
providing adequate service to customers.
It shall also serve a veritable source
of information on issues on supply chain
management.
1.6 STATEMENT OF
THE HYPOTHESIS
1
H0 Inventory
control and customer service in East-Wind foods is low
H1 Inventory
control and customer service in East-Wind foods
is high
2 H0 Supply chain management in East-Wind foods is not significant
H1 supply chain management in East-Wind foods
is significant
3 H0 The
impact of supply chain management on
inventory control and customer service in east
wind foods is low
H1 The impact of supply chain management on
inventory control and customer
service in east wind foods is high
1.7 SCOPE OF THE STUDY
1 The study provides an appraisal of the use
of supply chain management in manufacturing organization to control inventory
levels while providing adequate service to customers
1.1
DEFINITION
OF TERMS
SUPPLY
CHAIN MANAGEMENT
The supply chain encompasses all of those
activities associated with moving goods from the raw-materials stage through to
the end user.”
Advocates for this business process realized
that significant productivity increases could only come from managing
relationships, information, and material flow across enterprise borders. One of
the best definitions of supply-chain management offered to date comes from
Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at Ohio
State University. La Londe defines supply-chain management as follows: “The delivery of enhanced customer and
economic value through synchronized management of the flow of physical goods
and associated information from sourcing to consumption
SUPPLY CHAIN MANAGEMENT DEPARTMENTS
Company’s Supply Chain Management
department functions include
Inventory management
Transportation service procurement
Materials handling
Inbound transportation
Transportation operations management
Warehousing management
Moreover,
the Supply Chain Management department is expected to increase its range of responsibilities,
most often in line with the thinking that sees the order fulfillment process as
one co-ordinate set of activities. Thus the functions most often cited as
planning to formally include in the Supply Chain Management department are:
Customer service performance monitoring
Order processing/customer service
Supply Chain Management budget
forecasting
On
the other hand, there are certain functions which some of us might feel logically
belong to Supply Chain Management which companies feel are the proper domain of
other departments. Most difficult to bring under the umbrella of Supply Chain Management
are:
Third party invoice payment/audit
Sales forecasting
Master production planning