Supply chain has the following four main functional components
1. Demand Planning
Demand Planning is used to predict the demand of products and services based on forecasts carried away by the management. Proper demand planning helps to utilize the supply chain links in the best possible way which leads to improved customer services and lower operational cost.
2. Manufacturing Planning and Scheduling
Manufacturing and Production planning is carried way after finalizing the demand planning for the future. It is a process that optimally schedules manufacturing orders with production capacity. This is performed by combining material requirements planning (MRP) and capacity requirements planning (CRP) to create optimized and constrained production plans. Optimized manufacturing planning leads to optimal use of raw materials and reduces waste.
3. Supply Planning
It’s a process to meet the raw material demand for the production plants and the end customer demands of final products based on available inventory and transportation resources. The Supply planning is outlined considering the manufacturing planning and scheduling to provide adequate raw materials for production activity in the proper quantity at the proper time. The production process should not be halted due to the shortage of raw materials during any stage of the production process.
4. Transportation Planning
Transportation planning process is used to optimally schedule, load or unload and transfer of raw materials or end products by using different transportation services. The category of transportation services used depends on the quality and quantity of raw materials or end products.
All these functional components have to be executed in the proper order for developing a proper supply chain as they have some inter dependency. Supply Chain Management takes care of the management activities of these functional components.