Source Of Cost In Supply Chain Management

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Inventory exists in the supply chain because of a mismatch between supply and demand. Inventory is the major source of cost in the supply chain. The figure given below shows how the effective inventory management is work. This figure shows that there must be some inventory level we must manage for efficiently fulfill the demand of customers and we must out the inventory in time so that we are able to send the stock in stores in time and the damage stock is also out from the WH so that we maintain a good inventory level. The aims is to give the supply chain management side of the theoretical background for the supply chain modeling efforts and since the Supply chain management is a vast area. Here we emphasize the aspects of customer service…show more content…
And Ganeshan and Harrison has yet another analogous definition: A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Figure: An Example of a Supply Chain. Figure shows an example of a supply chain. Materials flow downstream, from raw material sources through a manufacturing level transforming the raw materials to intermediate products (also referred to as components or parts). These are assembled on the next level to form products. The products are shipped to distribution centers and from there on to manufacturers and customers. Issues in Supply Chain Management The classic objective of logistics is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost. Figure translates this overall objective into four main areas of concern within supply chain management. Figure: Hierarchy of…show more content…
According to Ganeshan and Harrison], these are related to location, production, inventory, and transportation. Location decisions are concerned with the size, number, and geographic location of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to produce, where to produce them, which suppliers to use, from which plants to supply distribution centers, and so on. Inventory decisions are concerned with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to

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