SCM & Co.

The Latin word “inventarium” translates to “Inventory” or “Stock” referring to goods a business holds for resale or repair. Inventory management within supply chain management (SCM) minimizes costs and maximizes satisfaction by maintaining optimal inventory levels and avoiding overstocking or stockouts. Integrating inventory control with SCM enhances forecasting, resource allocation, and efficiency, ensuring faster delivery and improved customer satisfaction.

Supply Chain Management

Supply Chain Management (SCM) is the active management of supply chain activities to maximize customer value and achieve sustainable competitive advantage. It is the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory and of finished goods from point of origin to point of consumption.

Within the Value Chain at least in terms of Supply Chain activities (to maximize customer value and achieve sustainable competitive advantage), the supply chain responsible often must account for both the supply chain as well as the Demand Chain all the while corresponding competencies were not extensively allocated.

Procurement

What you perhaps encounter is corporate management (value chain) and responsible people each for supply chain (purchasing as part of Procurement generating Profit), marketing & sales (sales generating Revenue) and services. Corporations may pay their bills from revenue but what should be left is profit.

Therefore, one might very well look into the possibility of creating ground for demand chain or even value chain responsibles for the sake of a healthy mix of competencies and responsibilities.

Learn More About The Demand Chain

The demand chain is an essential concept that encompasses the processes and activities involved in satisfying customer needs. It is crucial for businesses to comprehend how this chain works to enhance their operational efficiency and meet market demands effectively. The demand chain extends beyond the traditional supply chain, focusing on value creation based on customer insights.

At the heart of the demand chain lies the significance of understanding customer preferences and behaviors. Companies that leverage customer insights can adapt their strategies accordingly, ensuring that products and services align with consumer expectations. This dynamic approach not only fosters customer satisfaction but also drives brand loyalty, ultimately benefiting the organization’s bottom line.

In conclusion, the demand chain serves as a pivotal framework for organizations aiming to excel in a competitive landscape. As businesses prioritize customer engagement and adaptive strategies, the demand chain will continue to evolve. By recognizing the importance of adapting to shifting consumer demands, organizations can effectively optimize their processes, minimize waste, and improve profitability. Embracing the demand chain philosophy is essential for future success, as it aligns operational goals with customer-centric approaches.

After all, you may have met Supply Chain Managers but have you ever heard of a Demand Chain Manager or even a Value Chain Manager?

“One might very well look into the possibility of creating ground for demand chain or even value chain responsibles for the sake of a healthy mix of competencies and responsibilities.”
– Eric Roth

Inventory Control

Inventory Control, including warehouse management, ensures stock is accurately tracked and accounted for at all times. Its purpose is to provide uninterrupted support for production, sales, and maintenance with minimal inventory, aiming to maximize profits while maintaining customer satisfaction

Keep track of the stock that is already in the warehouse. This includes knowing what products are being stocked and how much of a particular item is available.
Aspects of warehousing designs, such as knowing where everything is and ensuring that the products are stored well.

Inventory Management

As an element of supply chain management, Inventory Management includes aspects such as controlling and overseeing ordering inventory, storage of inventory and controlling the amount of product for sale. The goal is to have the right inventory at the right quantity at the right quality in the right place at the right time at the right cost.

Stock the right amount of inventory.
Pay the right amount for your inventory (Economic Order Quantity).
Know your reorder point.
Ensure you have the right amount of inventory in the right place.

Materials Management

While inventory management is primarly about specifying the size and placement of stocked goods, Materials Management is simply the process by which an organization is supplied with the goods and services that it needs to achieve its objectives of purchasing, storage and movement of materials mostly for production.

ABC / XYZ Analysis

In materials management, the ABC Analysis (or Selective Inventory Control) is an inventory categorization technique. ABC analysis divides an inventory into three categories. There is also the XYZ Analysis, a way to classify inventory items according to variability of their demand.

ABC Aanalysis

“A items” being the most valuable ones with with highest demand and very tight control as well as accurate records.
“B items” with less value, medium demand and tightly controlled as well as goods records.
“C items“, the least valuable ones and low demand with the simplest controls possible and minimal records.

XYZ Analysis

“X items“: Very little variation. Characterised by steady turnover over time. Future demand can be reliably forecast.
“Y items“: Some variation: Although demand is not steady, variability in demand can be predicted to an extent. This is usually because demand fluctuations are caused by known factors, such as seasonality, product lifecycles, competitor action or economic factors. It’s more difficult to forecast demand accurately.
“Z items“: The most variation. Demand can fluctuate strongly or occur sporadically. There is no trend or predictable causal factors, making reliable demand forecasting impossible.

Reorder Point (ROP)

Of course, you will reorder materials / products before it goes out of stock but if you order too early, you will need to spend more on storing these excess items. If you order too late, you will be facing a disappointed boss and financial responsible but most importantly disappointed customers who will look to your competitors. Here’s how to calculate your reorder point (ROP):

Lead Time Demand + Safety Stock = Reorder Point

To find lead time demand, you simply multiply the lead time by your average daily sales. Lead time is the amount of time it takes from the point you request an order from your supplier and when it arrives in your warehouse. Therefore, do NOT confuse lead time with delivery time!

KANBAN

Last but not least, there is Kanban – literally meaning signboard or billboard in Chinese and Japanese – which is an inventory control system for supply chains. Let’s explore the six rules of Kanban and how they both apply to traditional production, just-in-time production (JIT) and knowledge work: Never Pass Defective Products • Take Only What’s Needed • Produce the Exact Quantity Required • Level the Production • Fine-tune the Production or Process Optimization • Stabilize and Rationalize the Process

Logistics

Generally, this refers to the detailed organization and implementation of a complex operation. In a general business sense though, logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations.

SCM vs Logistics

Logistics refers to activities within a company, such as purchasing and delivering raw materials, packaging, shipping, and transporting goods to distributors. Supply chain management, however, encompasses a broader network of external organizations like vendors, transportation providers, call centers, and warehouse providers working together to deliver products to customers.

Procurement Management

Procurement is the process of obtaining goods or services usually on a relatively large scale. Often confused with purchasing, procurement represents a more strategic and less purely transactional process.

Procurement Mgmt

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