Supply Chain Management

Introduction

Supply chain management is an integral component of operation management and has a direct effect on how successfully organizations function. The purpose of supply chain management is to remove communication barriers and eliminate redundancies by coordinating, monitoring, and controlling processes within an organization. Identifying the components of the supply chain, facilitating better decision-making, creating improved communication, and identifying weak links in the chain causing bottlenecks in an organization are crucial to supply chain integration. There are three principle elements of supply chain integration: management of information and financial flows, inventory management, and management of relationships of trading partners (Power, 2005).

‘Modern businesses are dynamic in nature and to stay competitive (organizations) need to optimize their business processes by understanding and reacting to the rapid changes in their environment’ (Banavar, Black, Caceres, Ebling, et al, 2005). Dialysis, a specialized field in the healthcare industry, is a major business entity with penchant for a rapidly changing environment. Dialysis is a medical treatment for individuals with limited or no kidney function and without this specialized therapy these unfortunate individuals would not survive. In dialysis, supply chain management is crucial from all aspects in providing comprehensive and adequate patient care. The constant changing needs of patients and the organizational environment can cause disruption in a well managed supply chain within a clinic’s operation resulting in inadequate patient care. Lack of inventory, inadequate staffing, and poor supplier relationships can all contribute to compromised customer (patient) service.

Identified Supply Chain Process

In any organization the inventory control process is a very important part of the supply chain process. Inventory control is concerned with minimizing the total cost of inventory. The three main factors in inventory control decision-making process are:

• The cost of holding the stock;

• The cost of placing an order or the set-up cost of production;

• The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand.

Inventory control is not just a materials management issue. The purchasing, receiving, and accounting departments all contribute to the accuracy of the inventory methods and records. Inaccurate inventory data will contribute to shipment delays, production stoppages, purchasing of the wrong items, and stocking too much inventory. Inventory management and inventory control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many changes in market demand, new opportunities due to worldwide marketing, global sourcing of materials, and new manufacturing technology, means many companies need to change their inventory management approach and change the process for inventory control.

Despite the many changes that companies go through, the basic principles of inventory management and inventory control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good inventory management and inventory activities have not changed. The inventory management system and the inventory control process provides information to efficiently manage the flow of materials, effectively use people and equipment, coordinate internal activities, and communicate with customers. Inventory management and the activities of inventory control do not make decisions or manage operations; they provide the information to managers who make more accurate and timely decisions to manage their operations. The process inventory management and inventory control contributes largely to the profit or loss an organization experiences.

Control of inventory, which typically represents 45% to 90% of all expenses for business, is needed to ensure that the business has the right goods on hand to avoid stock-outs, to prevent shrinkage (spoilage/theft), and to provide proper accounting. Many businesses have too much of their limited resource, capital, tied up in their major asset, inventory. Worse, they may have their capital tied up in the wrong kind of inventory. Inventory control systems range from eyeball systems to reserve stock systems to perpetual computer-run systems. Valuation of inventory is normally stated at original cost, market value, or current replacement costs, whichever is lowest. This practice is used because it minimizes the possibility of overstating assets. Minimum inventories based on reordering time need to become important aspects