Supply Chain Management : Food Processing Industry

Product Flow includes the movement of goods from supplier to consumer (internal as well as external), as well as dealing with customer service needs such as input materials or consumables or services like housekeeping. Product flow also involves returns/rejections (Reverse Flow).

In a typical industry situation, there will a supplier, manufacturer, distributor, wholesaler, retailer, and consumer. The consumer may even be an internal customer in the same organization. For example, in a fabrication shop, many kinds of raw steel are fabricated into different building components in cutting, general machining, welding centers and then are assembled to order on a flatbed for shipment to a customer. Flow in such a plant is from one process/assembly section to the other having relationship as a supplier and consumer (internal). The acquisition is taking place at each stage from the previous stage along the entire flow in the supply chain.

In the supply chain, the goods and services generally flow downstream (forward) from the source or point of origin to the consumer or point of consumption. There is also a backward (or upstream) flow of materials, mainly associated with product returns.

The financial and economic aspects of supply chain management (SCM) shall be considered from two perspectives. First, from the cost and investment perspective and second aspect based on from flow of funds. Costs and investments add on as moving forward in the supply chain. The optimization of total supply chain cost, therefore, contributes directly (and often very significantly) to overall profitability. Similarly, optimization of supply chain investment contributes to the optimization of return on the capital employed in a company. In a supply chain, from the ultimate consumer of the product back down through the chain, there will be a flow of funds. Financial funds (Revenues) flow from the final consumer, who is usually the only source of “real” money in a supply chain, back through the other links in the chain (typically retailers, distributors, processors, and suppliers).

THE INFORMATION FLOW :

Supply chain management involves a great deal of diverse information–bills of materials, product data, descriptions and pricing, inventory levels, customer and order information, delivery schedules, supplier and distributor information, delivery status, commercial documents, the title of goods, current cash flow and financial information, etc.–and it can require a lot of communication and coordination with suppliers, transportation vendors, subcontractors, and other parties. Information flows in the supply chain are bidirectional. Faster and better information flow enhances Supply Chain effectiveness and Information Technology (IT) greatly transformed the performance

THE VALUE FLOW:

A supply chain has a series of value-creating processes spanning over the entire chain in order to provide added value to the end consumer. At each stage, there are physical flows relating to production, distribution; while at each stage, there is some addition of value to the products or services. Even at the retailer stage though the product doesn’t get transformed or altered, he is providing value-added services like making the product available at a convenient place in small lots.

These can be referred to as value chains because as the product moves from one point to another, it gains value. A value chain is a series of interconnected activities that are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various product services), delivery to final customers, and final disposal after use. That is supply chain is closely interwoven with the value chain

THE FLOW OF RISK :

Risks in the supply chain are due to various uncertain elements broadly covered under demand, supply, price, lead time, etc. Supply chain risk is a potential occurrence of an incident or failure to seize opportunities of supplying the customer in which its outcomes result in a financial loss for the whole supply chain.

External risks can be driven by events either upstream or downstream in the supply chain:

• Demand risks – related to unpredictable or misunderstood customer or end-customer demand.

• Supply risks – related to any disturbances to the flow of product within your supply chain.

• Environment risks – that originate from shocks outside the supply chain.

• Business risks – related to factors such as suppliers’ financial or management stability.

• Physical risks – related to the condition of a supplier’s physical facilities.

Internal risks are driven by events within company control:

• Manufacturing risks – caused by disruptions of internal operations or processes.

• Business risks – caused by changes in key personnel, management, reporting structures, or business processes.

• Planning and control risks – caused by inadequate assessment and planning, and ineffective management.

• Mitigation and contingency risks – caused by not putting in place contingencies.

Radiofrequency identification (RFID) is an alternative technology with the potential to replace traditional universal product code (UPC) barcodes. RFID enables the identification of an object from a distance without requiring a line of sight. RFID tags can also incorporate additional data such as details of product and manufacturer and can transmit measured environmental factors such as temperature and relative humidity