What are the 5 basic steps of supply chain management?

Plan

The first step of supply chain management is planning. it involves a wide range of activities. The organizations and companies must first decide on their operations strategy. Whether to manufacture a product or component or buy it from a supplier is a major decision.

Options include:

• Manufacturing a product component domestically
• Manufacturing a component in a foreign market by setting up international production facilities
• Buying a component from a foreign supplier
• Buying a component from a domestic supplier

this step also involves setting the structure of the network of manufacturing facilities and warehouses, determining the levels of production and specifying transportation flows between sites. It also involves assessing how to improve the global supply chain and its management processes.

Source

The second step of supply chain management is the source. This aspect involves organizing the acquisition of raw materials and components. When sources have been selected, the companies must negotiate contracts properly and schedule deliveries. The performance of the supplier must be assessed and payments to the suppliers made when it is appropriate. In some cases, the companies will be working with a network of suppliers. This will involve working with this network, managing inventory and company assets, and ensuring that export and import requirements are met.

Make

This stage is concerned with scheduling of production activities, testing of products, packing and release. Companies must also manage rules for performance, data that must be stored, facilities and regulatory compliance.

Deliver

The delivery stage encompasses all the steps from processing customer inquiries to selecting distribution strategies and transportation options. Companies must also manage warehousing and inventory or pay for a service provider to manage these tasks for them. The delivery stage includes any trial period or warranty period, customers or retail sites must be invoiced and payments received, and companies must manage import and export requirements for the finished product.

Return

Return is associated with managing all returns of defective products, including identifying the product condition, authorizing returns, scheduling product shipments, replacing defective products and providing refunds. Returns also include “end-of-life” products (those that are in the end of their product lifetime and a vendor will no longer be marketing, selling, or promoting a particular product and may also be limiting or ending support for the product).

Companies must establish rules for the following:

• Product returns
• Monitoring performance and costs
• Managing inventory of returned product