Decisions for supply chain management can be divided in to two categories, strategic and operational. Strategic decisions are made typically over a longer time period and operational decisions are for short term, that focus on activities over a day-to-day basis. There are four major decision areas in supply chain management, they are:
Location Decisions:
The decision regarding the geographic placement of production facilities, stocking points, and sourcing points is the first step in creating a supply chain. The location of facilities needs resources for long time. These decisions are very important for a business because this is the basic strategy for accessing customer markets, and has impact on revenue, cost, and level of service. Although location decisions are primarily strategic, they also influence operational level.
Production Decisions:
The strategic decisions include the production decisions like what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets because these decisions have a big impact on the revenues, costs and customer service levels of the firm. Operational decisions focus on detailed production scheduling which include the construction of the master production schedules, scheduling production on machines, and equipment maintenance.
Inventory Decisions:
Inventory includes raw materials, work in progress and finished goods. Their primary purpose of inventory decisions is to buffer against any uncertainty that might exist in the supply chain. Holding costs of inventories are very high and their efficient management is critical in supply chain operations. Operational inventory decisions include deployment strategies, control policies, setting safety stock levels, at each stocking location.
Transportation Decisions:
These are closely linked to the inventory decisions, since the best choice of mode is often found comparing the indirect costs of the inventory associated with different modes. Customer service levels, and geographic location play vital roles in such decisions. Transportation is more than 30 percent of the logistics costs. Shipment sizes, routing and scheduling of equipment are key in effective management of the firm's transport strategy.
All the above supply chain decisions have a vital part in the overall management decision making processes.
Location Decisions:
The decision regarding the geographic placement of production facilities, stocking points, and sourcing points is the first step in creating a supply chain. The location of facilities needs resources for long time. These decisions are very important for a business because this is the basic strategy for accessing customer markets, and has impact on revenue, cost, and level of service. Although location decisions are primarily strategic, they also influence operational level.
Production Decisions:
The strategic decisions include the production decisions like what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets because these decisions have a big impact on the revenues, costs and customer service levels of the firm. Operational decisions focus on detailed production scheduling which include the construction of the master production schedules, scheduling production on machines, and equipment maintenance.
Inventory Decisions:
Inventory includes raw materials, work in progress and finished goods. Their primary purpose of inventory decisions is to buffer against any uncertainty that might exist in the supply chain. Holding costs of inventories are very high and their efficient management is critical in supply chain operations. Operational inventory decisions include deployment strategies, control policies, setting safety stock levels, at each stocking location.
Transportation Decisions:
These are closely linked to the inventory decisions, since the best choice of mode is often found comparing the indirect costs of the inventory associated with different modes. Customer service levels, and geographic location play vital roles in such decisions. Transportation is more than 30 percent of the logistics costs. Shipment sizes, routing and scheduling of equipment are key in effective management of the firm's transport strategy.
All the above supply chain decisions have a vital part in the overall management decision making processes.
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