The supply chain has distinct movements that provide the linkages to the various activities. We refer to these movements as ‘material, information and money flows’ in a supply chain. The types and directions of these flows will be discussed in more detail below. The success and failure of a supply chain depend on the capacity and capability of these flows along the supply chain.
Types of Supply Chain Structure and Flows
The aim within any supply chain is to maintain the timely, uninterrupted flow of materials from sources to consumption. Let us look at some of the activities involved in this flow of materials from sources to consumption.
Acquisition of Goods
Organisations will have to make a decision concerning whether to produce goods or a service internally or to source it from an outside supply chain partner. If goods or services are to be sourced from supply chain partners, it is then the role of procurement to provide this important linkage so as to ensure materials flow into the organisation effectively. Every organisation depends on purchasing to an extent, and some of these procurements involve very critical goods and services.
It is important that information flows in all directions of the supply chain. This aspect is referred to as ‘information sharing’, and is essential if the objectives of a supply chain are to be achieved. We often talk of ‘upstream flows’ involving demand and requirements from the buy side of the chain and ‘downstream flows’ depicting product availability information from the supply side of the chain.
Organisations and their supply chain partners use information to support the various supply chain activities. Some of the activities we have described above use information intensively. We need information to tell us the requirements and demands from our customers. We need information flows to record and retrieve necessary data for physical and monetary flows.
Demand and Supply Data
These take the form of customer orders and supply related data for various purposes, such as for stock-tracking. The flow of customer orders through the chain, as noted earlier, will trigger all other activities of the chain although, for many businesses, it is the demand forecast that does some of this. In some systems, such as where minimum stock levels have been set up, supply chain demand is easier to manage; however, it requires systems to be updated and monitored so as to capture stock
levels. Order processing systems which are interfaced with other operations—such as procurement and inventory control—will facilitate a smooth flow of demand and supply data.
Documentation forms part of the information flows in supply chain operations. Increasingly companies are trying to minimise documentation and go paperless however success is only partial currently. The operations generate a substantial amount of documents from the different transaction that take place. Below we explore some of these documents to demonstrate how they enhance the flow of information and support materials flows.
Purchasing is a process of all activities associated with the identification of needs, the location and selection of suppliers, the negotiation of terms and conditions (where possible), and following up so as to ensure goods and services are delivered and supplied at acceptable service levels. Purchase systems play a significant role in triggering the material flows of a supply chain. These systems and activities may differ from organisation to organisation, and also vary in terms of values and process complexity.
Goods and services flow through the supply chain by various means of transportation. The importance of the different modes of transport (Figure 1.6) has an obvious impact on the effectiveness of supply chain operations.
Each of these modes of transport has specific documents required for the movement of goods throughout the supply chain operations (e.g. road consignment note, sea waybill, air waybill, etc.). These documents specify:
The names of the sender (consignor) and receiver (consignee)
The origin and destination points
The description of the goods to be moved
The freight charges
The responsibilities for payment of freight changes.
Other relevant documents
These include the following:
Manifest, lists all goods carried by carrier
Declaration/certificate of origin, endorsed by issuing authority
Invoice declaration—goods qualify for preference?
Preference (movement) certificate
Labelling and material flows
Labels on external packaging should show the packaging number, the port or airport of destination, and a mark that would enable ready identification for when the consignee takes delivery. The package number and identification mark should also be written on the documentation.
When necessary, material handling marks or symbols are provided to show e.g. ‘fragile, handle with care’, ‘use no hooks’, ‘this way up’, ‘keep away from heat’, ‘sling here’, ‘centre of gravity’ and ‘keep dry’. These marks and instructions should be adhered to as they facilitate the smooth flows of goods and services so that they arrive in the right quantity and quality at the right time, destination, condition and cost.
The flow of money is required in every supply chain. Money flows from the consumer upstream in a supply chain until all suppliers have received payment for the goods and services they provided. In general, goods and services flow relatively well and information flow can be considered erratic but improving. Usually, funds or money flows appear to lag behind as they depend on the flow of products and information.
Hope this blog on supply chain structure and flows, helped you broaden your understanding on the scope of supply chain industry and how you can harness your talent as a field expertise.
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