FIVE STEP PROCESS:
PLANNING-- Planning is the strategic step of SCM. Companies, of any size, need a strategic plan on how to reach their organizational objectives, which should always include maintaining low production costs and delivering products with high value to customers. It is important to carefully manage all of the resources that contribute to a company's final product offering. It is also essential to create a system of measuring a firm's efficiency in meeting the demands of consumers.
CHOOSING A SUPPLIER-- It is the responsibility of the firm's purchasing department to choose a supplier that is both cost efficient and reliable. Managers of the supply chain for any given company must develop a consistent set of prices and ordering, payment, and delivery options; this way, a routine between the two companies can be established and will become more fluid over time. Managing goods and services inventory will become easier, and strong business relationships will emerge.
PRODUCTION-- This is the production step of SCM.The activities involved are testing of final product offerings, packaging, and preparation for delivery to end users. Supply chain managers are better able to measure levels of product quality, employee productivity, and levels of output. Changes in production processes can be made accordingly.
DELIVERY-- The fourth step of SCM is sometimes referred to as the logistics step. Supply chain managers have to do a great deal of coordinating: first, to track the receipt of orders from customers in a timely and organized fashion. Second, a warehouse network that is geographically convenient for both the supplier and the customer must be developed. Carriers must be chosen to deliver final products to customers, and lastly, an invoice system must be set up in order to receive payments from customers.
OPTION TO RETURN-- For some companies, this can be the most problematic portion of SCM. Supply chain managers are responsible for facilitating a flexible and responsive network for customers who wish to return defective or unsatisfactory products. Unfortunately, excess products (even in excellent condition) may be returned to the supplier in this step of SCM.
Extended Supply Chain
The supply chain is not only made up of supply chain managers; the extended supply chain represents every individual who in some way makes a contribution to a product offering. It is imperative that supply chains maintain awareness of what is happening in their extended supply chain. Anything can throw of the balance of the supply chain to a certain extent, and it is the responsibility of the company to locate new suppliers, if and when necessary.