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Production With TQM Chap 3
Production With TQM Chap 3
Chapter 3
Supply Chain Management - Supply
chain management is the
management of the flow of goods
and services and includes all
processes that transform raw
materials into final products. It
involves the active streamlining of
a business's supply-side activities to maximize customer value and gain a competitive
advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains that are as
efficient and economical as possible. Supply chains cover everything from production to
product development to the information systems needed to direct these undertakings.
How Supply Chain Management Works
SCM attempts to centrally control or link the production, shipment, and distribution of a
product. By managing the supply chain, companies are able to cut excess costs and deliver
products to the consumer faster. This is done by keeping tighter control of internal inventories,
internal production, distribution, sales, and the inventories of company vendors.
SCM is based on the idea that nearly every product that comes to market results from
the efforts of various organizations that make up a supply chain. Although supply chains have
existed for ages, most companies have only recently paid attention to them as a value-add to
their operations.
SCM consists of five parts:
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adopt. Careful selection and implementation of the supply chain technologies a company uses
is essential for supply chain success.
Forecasting
Forecasting is a technique that uses historical data as inputs to make informed estimates
that are predictive in determining the direction of future trends. Businesses utilize forecasting
to determine how to allocate their budgets or plan for anticipated expenses for an upcoming
period of time. This is typically based on the projected demand for the goods and services
offered.
Forecasting plays a vital role in the process of modern management. It is an important and
necessary aid to planning and planning is backbone of effective operations.
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1. It enables a company to commit its resources with greatest assurance to profit over the long
term.
4. The making of forecasts and their review by managers, compel thinking ahead, looking to the
future and providing for it.
5. Forecasting is an essential ingredient of planning and supplies vital facts and crucial
information.
6. Forecasting provides the way for effective coordination and control. Forecasting requires
information about various external and internal factors. The information is collected from
various internal sources. Thus, almost all units of the organisation are involved in this process,
which provides interactive opportunities for better unity and coordination in the planning
process.
Similarly, forecasting can provide relevant information for exercising control. The managers can
know their weakness in forecasting process and they can take suitable action to overcome
these.
7. A systematic attempt to probe the future by inference from known facts helps integrate all
management planning so that unified overall plans can be developed into which divisional and
departmental plans can be meshed.
8. The uncertainty of future events can be identified and overcomes by an effective forecasting.
Therefore, it will lead to success in organisation.
Limitations of Forecasting:
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1. Basis of Forecasting:
The most serious limitations of forecasting arises out of the basis used for making forecasts.
Top executives should always bear in mind that the bases of forecasting are assumptions,
approximations, and average conditions. Management may become so concerned with the
mechanism of the forecasting system that it fails to question its logic.
This critical examination is not to discourage attempts at forecasting, but to sound caution
about the practice of forecasting and its inherent limitations.
2. Reliability of Past Data:
The forecasting is made on the basis of past data and the current events. Although past
events/data are analysed as a guide to the future, a question is raised as to the accuracy as well
as the usefulness of these recorded events.
3. Time and Cost Factor:
Time and cost factor is also an important aspect of forecasting. They suggest the degree to
which an organisation will go for formal forecasting. The information and data required for
forecast may be in highly disorganized form; some may be in qualitative form.
The collection of information and conversion of qualitative data into quantitative ones involves
lot of time and money. Therefore, managers have to tradeoff between the cost involved in
forecasting and resultant benefits. So forecasting should be made by eliminating above
limitations.
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