It includes the movement and storage Of raw materials, work-in- process inventory, and finished goods from point of origin to point of consumption(Wisped, 2015). It is the integrated management of product flow, information flow, and cash flow that throughout the flow of goods and services, for maximizing the value provided by minimum cost. So the vital foundation of SCM is to coordinate smoothly the relationship and operation between each department. However, in the most of companies, it is difficult for one department to understand the jobs of another department.
The marketing department attempts to acquire more orders but the amount exceeds the production department’s capacity; the R department attempts to diversify products but the purchasing department must contact with more suppliers which results in few economies of scale and financial deficits. The barriers among departments could be the biggest block for implement SCM. In the addition, the whole supply chain could not be completed by one many on today but more rely on cooperation with business associations.
The big companies which try’ to construct the whole supply chain always lose the competitive advantage of cost and expansion speed if there is no monopoly or absolute advantage. COPY recently has acquired a couple of firms, but its sub company, China Agro-Industries Holdings Ltd has a decreasing profit and the ROAR in 2013 was only 2. 10. 6. SCM consists of three functions, supply management, operation management, and logistic management. Supply management Supply management as a category of SCM is different from purchasing management which focuses on dealing orders.
Supply management more relies on the strategic management of suppliers, ensures the us table costs and quantities through analyzing expenses, confirming needs, evaluate and choosing suppliers, making contracts, and managing suppliers(Purchasing and Supply chain management, 2014). It could directly influence the profitability of a firm. Every dollar the firm saves from the suppliers, the profit can be increased by one dollar; while every dollar the firm earn from customers, the profit could be increased by ten cents.
The common problem caused in supply management is there are too many appliers owing to too many types of components or materials, so the firm would has few economies of scale and complex orders. After 2000, Motorola had introduced up to 65 new mobile phones and a couple Of appearances and components, that incredibly increased the difficult level of supply management, but were pointless, then its mobile phone department was sold in 2011. Therefore, if the firm wants to maintain stable SCM, it should decides less suppliers and standardized components.
Operation management Operation management is the integration of design, industrial engineering, management information system, quality management, manufacture management, inventory management, accounting, etc. , for more efficiently planning, utilizing and controlling organization(Purchasing and Supply chain management, 2014). In fact, operation management is a repeat but fussy process no matter the process is easy or complicated. It is very difficult to do one thing again and again without mistakes forever, that is the reason why McDonald can be the leader of fast-food industry because its foods are the same quality whenever and wherever.
So the series of systems of processing, training, monitoring, etc. Is vital, to design, operate, and upgrade these systems is operation management. Most of big companies tends to diversify its products when they have high- liquid cash flow, but the large scale of company could not bring profit but discomposes of scale, also the more complicated SCM. Chinese state-owned enterprises now becomes very much big during these decades, but they are also famous for bureaucracy in management and inefficiency. But some firms only focuses on several products and gets high profit.
It is important to cut the extra and no-profit product lines in doing operation management. Logistic management Logistic management is to prompt goods, services, and information to be moved and stored by managing transportation, vehicles, storage, material handling, orders, logistic network, inventory control, demanding plan, and the management of delivery company(Purchasing and Supply chain Logistic management very relies on the transparency of information flow or the firm can not plan for production and delivery goods to customers on time.
In 2000, Rolls-Royce decided to reform SCM, it started SAP as the SCM system, and allocate a GAPS system for every truck, all the information about odds would be uploaded to SAP, the firm’s cash flow and inventory turnover were quickly improved. Logistics management also directly affects the costs because transportation is expensive, it is critical to choose the location of manufacture facilities. Before 1997, Apple designed its computers in America, produced components in Taiwan, assemble components in Ireland, then sold computers over the world, Apple got little profit because money was paid to airline companies.
In 1998, Cook closed the factors in North America and Ireland, then transferred all the production process in Asia, supply chain was simplified, profit was increased. Inventory management Inventory management is the foundation of three categories. How many materials or components the purchasing department should prepare? How many goods the production department should produce for dealing with orders or uncertain factors? How many goods customers could purchase the marketing department should forecast?
So inventory management can reflect the whether SCM Of a company is efficient or not. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations thin a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods.
The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting and also by blandishment Or can be defined as the left out stock of any item used in an organization. Wisped, 201 5) Inventory is generally classified into cycle inventory, safe inventory, and extra inventory. Too much safe inventory and extra inventory could result in excess inventory, but to produce goods only according to orders could result in inventory shortage. So the balance in inventory management must be controlled and adapt in each different situation. Available lower inventory For most of companies, excessive inventory is a stubborn problem. The clothing industry is a typical example, customers could find the discounted loathes whenever.
Excessive inventory could be caused by wrong forecasts, poor demanding plans too much debtors and creditors, delay from suppliers or delivery companies, quality problems, design problems, etc. , but managers always notice the too much inventory when there is something wrong with cash flow because the profit has contributed to the inventory, and the unstable inventory could be depreciated. Especially for the companies with long-term working capital cycle and high costs, the excessive inventory could break down the cash flow and result in bankruptcy.
Roll-Royce, one of the biggest manufactures of engine, before 2000, it took average 260 days even up to 1. 5 years to complete the order of an engine, the inventory turnover was only 3. 4 a year, the inventory approached to 3 billions pounds. Whereas its competitor, Gee’s inventory turnover is 8 a year, its Backlog fund was more 2. 1 billions pounds than Gee’s. So the high inventory obviously reduces the competitive advantage of this kind of companies.
Available higher inventory Low inventory is good for most companies, but also probably cause inventory shortage which is vital to some particular companies. This kind Of company usually has a variety of the customers which needs a large amount of goods constantly and whenever. Some large equipment and machineries key components need to changed frequently and immediately, so the component manufacturers usually set the storage near the customers with very high inventory for satisfying the customers’ needs. For example, the inventory turnover of components of SIS Air Force is less than 1 a year.
Quality control Quality control emphasizes testing of prod cuts to uncover defects and reporting to management who make the decision to allow or deny product lease, and eliminating all factors that could cause defects on the quality loop. It is a process by which entities review the quality of all factors involved in production. ISO 9000 defines quality control as “A part of quality management focused on fulfilling quality 2015). It concerns three factors: 1 Elements such as controls, job management, defined and well managed processes, performance and integrity criteria, and identification of records 2.
Competence, such as knowledge, skills, experience, and qualifications 3. Soft elements, such as personnel, integrity, confidence, organizational ultra, motivation, team spirit, and quality relationships. (Wisped, 201 5) Quality control means to control the process of transformation. For manufacture business, it means to ensure the needed design, technical process, production, inspection; for service business, it means to ensure the specific service process and preparation.
Setting quality standards The first step of assuring quality control is to set a series of quality standards. For manufacturers, standards include the products’ functions, durability, safety, technical procedure, etc.. For service businesses, standards include the attitude to customers, the cleanliness of environment, the level of professional workers, the materials used to serve customers, etc.. The quality standards must be able to be measured by specific numbers, and included in KIP, used to guide workers to achieve the needed quality and to evaluate the level of quality.
Training staff Workers are the people who make goods by hands Or controlling the machinery, or contact with customers, so it is important to let workers realize the concept of quality when they accept the training courses of specific skills. After courses the firms can give workers who produce high-quality products uncial incentives and praise in public, give workers who produce Iow- quality products warns and financial punishment, for enhancing the concept of quality.
Evaluating The manufacture businesses can use the method of sampling inspection to evaluate the defect rate, if the defect rate is over a number set, this batch Of products can not be sold with the other batches. Quality control tests and inspections can also be done by a group of particular quality control staff. The service business can collect the feedback from customers online or at the end of service, like APS always invite users to give them a rating and suggestions. Then the result of sampling inspections and feedback both can be uploaded in a statistical system, which produces meaningful charts and graphs.
Finally a evaluation report can be prepared according the data. Improving systems The engineering and IT technologies now can be used in business for enhancing quality of goods and services. The standardized production can be completely done by equipment and machinery with few mistakes and high accuracy, CAM can substitute for people to control the machinery and do something people can not do. CAD can help both manufacturers and service sinuses paint the more accurate and pretty design pictures easily and quickly.
When all these processes are improved, the quality would be improved. CONCLUSION Through this investigation about business operation, how supply chain management, inventory management, and quality control from an integral part of business operation. Supply chain management is the highest-level management which controls and coordinates the whole business operation in the modern society. Inventory management is the transition point within business operation, which connects three categories of supply chain management.