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Core Functions of Supply Chain

bsdinsight@bsdinsight-com
837 Posts
#1 · 8 May 2025, 08:27
Below is the detailed explanation that focusing on the 8 Core Functions and Supporting Elements, with detailed explanations and examples for each section. This is tailored for an article on a blog like BSD Blog, as per your request.
8 Core Functions of Supply Chain
  1. Strategic Sourcing
Explanation: This involves analyzing, selecting, and managing suppliers to ensure a stable, high-quality, and cost-effective supply. It focuses on building long-term procurement strategies.
  • Spend Analysis: Reviewing company spending to identify cost-saving opportunities.
  • Supplier Selection: Evaluating and choosing suppliers based on criteria like price, quality, and reliability.
  • Category Management: Grouping goods/services to optimize procurement (e.g., raw materials, electronics components).
Example: A smartphone manufacturing company in Vietnam conducts a Spend Analysis and discovers that importing screens from Supplier A is too expensive. They find they can save 15% by switching to Supplier B in South Korea, with comparable quality. They evaluate Supplier B through Supplier Selection (based on price, delivery time, and past performance) and group screens under the “electronics components” category for centralized management (Category Management).
  1. Procurement & Purchasing
Explanation: This process focuses on executing procurement transactions, from purchase requests to payments, ensuring the business has the necessary materials or services on time.
  • Purchase Requisition: The production department submits a request for materials.
  • Purchase Order Processing: Creating and sending purchase orders to suppliers.
  • Invoice Matching & Payment: Verifying supplier invoices and processing payments.
Example: A garment factory in Binh Duong needs 10,000 meters of fabric to produce T-shirts. The production team submits a Purchase Requisition for the fabric. The procurement department creates a Purchase Order and sends it to a fabric supplier in Dong Nai. After receiving the fabric, they receive an invoice, verify the quantity and price against the order (Invoice Matching), and pay the supplier via bank transfer (Payment).

Suppy Chain Management

  1. Production & Manufacturing Planning
Explanation: This process involves planning and managing production to ensure products are made on time, with the right quality and quantity.
  • Production Scheduling:
    • Master Production Scheduling (MPS): Creating an overall production plan.
    • Capacity Planning & Resource Allocation: Ensuring enough machinery and manpower.
    • Batch Production Scheduling: Organizing production in batches.
    • MRP (Material Requirements Planning):
      • BOM Management: Managing the bill of materials.
      • Inventory Status Tracking: Monitoring raw material inventory.
      • Material Requirements Calculation: Calculating the materials needed.
      • Planned Order Releases: Scheduling material orders.
  • Manufacturing Process Design:
    • Process Flow Optimization: Streamlining production flow.
    • Workstation & Layout: Arranging workstations efficiently.
    • SOPS (Standard Operating Procedures): Establishing standard procedures.
  • Production Control & Monitoring:
    • Shopfloor Control: Managing shopfloor activities.
    • Production Tracking: Monitoring production progress.
    • Performance Metrics & Quality Control: Measuring performance and ensuring quality.
Example: A motorcycle factory in Vinh Phuc plans to produce 5,000 units in a month. They use MPS to schedule 1,000 units per week and Capacity Planning to ensure they have 50 workers and 10 assembly machines. Through MRP, they calculate they need 10,000 wheels and 5,000 engines, check inventory to find only 2,000 wheels in stock, and place an order for more (Planned Order Releases). They optimize the assembly process (Process Flow Optimization) by placing the painting station before the assembly station (Workstation & Layout), use Shopfloor Control to ensure workers stay on schedule, and inspect the motorcycles for quality before shipping (Quality Control).
  1. Warehousing & Fulfillment
Explanation: This involves managing warehouses and ensuring orders are delivered to customers accurately and on time.
  • Warehouse Design:
    • Layout Optimization: Arranging the warehouse for easy access to goods.
    • Slotting & Space Utilization: Using space efficiently.
  • Warehouse Operations:
    • Receiving & Put-Away: Receiving and storing goods.
    • Picking and Packing: Retrieving and packing items for orders.
    • Cross-Docking: Transferring goods directly without storage.
  • Automation & Tech:
    • WMS (Warehouse Management System): Software to manage warehouse operations.
    • Robotics and Conveyors: Robots and conveyors for moving goods.
    • IoT Sensors & Tracking: Sensors to monitor goods.
  • Fulfillment Strategies:
    • Same-Day Fulfillment: Delivering orders on the same day.
    • Click & Collect: Customers order online and pick up at a store.
    • Drop Shipping: Suppliers ship directly to customers.
Example: An e-commerce company in Hanoi operates a 5,000 m² warehouse. They optimize the layout (Layout Optimization) by placing fast-moving items near the exit and use a WMS to track item locations. When they receive 1,000 smartphones from a supplier (Receiving), they store them on shelves (Put-Away). An online order for 5 smartphones is processed—workers retrieve the items (Picking) and pack them in 30 minutes (Packing). The company offers Same-Day Fulfillment, delivering the order to a customer in Hanoi on the same day, and uses IoT Sensors to monitor warehouse temperature, ensuring the goods remain undamaged.
  1. Transportation & Logistics
Explanation: This involves managing the transportation of goods from suppliers to warehouses and from warehouses to customers.
  • Transport Planning:
    • Mode Selection: Choosing the transport mode (e.g., road, sea).
    • Route Optimization: Finding the fastest, most cost-effective route.
  • Last-Mile Delivery:
    • Delivery Windows: Delivering within customer-selected time slots.
    • Crowd Sourced Delivery: Using freelance delivery personnel.
    • Real-Time Tracking: Tracking orders in real-time.
  • Freight Management:
    • Carrier Selection: Choosing a transportation company.
    • Freight Auditing & Payment: Reviewing and paying transportation costs.
  • Logistics Tech:
    • TMS (Transportation Management System): Software for managing transportation.
    • GPS & Telematics: Tracking vehicle locations.
    • Blockchain for Traceability: Using blockchain to trace goods’ origins.
Example: A food company in Ho Chi Minh City needs to deliver 500 cartons of fresh milk to a supermarket in Da Nang. They choose road transport via truck (Mode Selection) and use a TMS to optimize the route along National Highway 1A (Route Optimization). They partner with a large logistics company (Carrier Selection) and verify the transport invoice before payment (Freight Auditing). The supermarket can track the truck’s location through an app using GPS (Real-Time Tracking), and the company uses Blockchain to ensure the milk’s origin is transparently recorded.
  1. Supply & Demand Planning (S&OP)
Explanation: This ensures supply and demand are balanced through coordination between departments and accurate forecasting.
  • Cross-Functional Alignment: Collaboration between sales, production, and finance.
  • Scenario Planning: Planning for different scenarios (e.g., sudden demand spikes).
  • Consensus Building: Achieving agreement across departments.
Example: A beverage company in Can Tho forecasts a 30% increase in soft drink demand during the Lunar New Year. The sales, production, and finance teams meet (Cross-Functional Alignment) to agree on producing an additional 50,000 bottles. They plan for a scenario where demand rises 50% due to unusually hot weather (Scenario Planning). After discussions, the teams agree to increase the production budget (Consensus Building) to meet the demand.
  1. Inventory Management
Explanation: This involves managing inventory to ensure there’s neither a shortage nor an excess of stock.
  • Inventory Policy Planning:
    • Safety Stock Strategy: Keeping extra stock to mitigate risks.
    • Network-Wide Stock Allocation: Distributing inventory across the network.
    • Replenishment Policy: Defining when to restock.
  • Inventory Models:
    • Economic Order Quantity (EOQ): Calculating the optimal order quantity.
    • Recorder Point Model: Determining the reorder point.
    • Newsvendor Model: Managing inventory for uncertain demand.
  • Safety Stock:
    • Based on Service Level: Stocking based on desired service levels.
    • Based on Lead Time Variability: Stocking based on delivery time fluctuations.
Example: A supermarket in Nha Trang manages its fresh milk inventory. They use EOQ to determine that ordering 1,000 cartons at a time is cost-optimal. They set a Recorder Point to reorder when stock drops to 200 cartons and keep a Safety Stock of 100 cartons to account for potential supplier delays (Lead Time Variability). The supermarket also allocates 500 cartons to its Nha Trang branch and 500 to its Da Lat branch (Network-Wide Stock Allocation).
  1. Order Management
Explanation: This involves managing the entire process from receiving an order to delivering it and supporting the customer.
  • Order Processing:
    • Order Capture: Receiving the order.
    • Validation & Verification: Ensuring the order is valid.
    • Fulfillment Triggering: Initiating delivery.
  • Omni-Channel Integration:
    • Online & Offline Sync: Synchronizing online and offline orders.
    • Unified Inventory View: Having a single view of inventory.
    • Seamless Customer Experience: Ensuring a smooth customer experience.
  • Customer Communication:
    • Order Status Updates: Updating customers on their order status.
    • Exception Handling: Managing issues (e.g., delayed delivery).
    • Returns Processing: Handling returns.
Example: A fashion store in Da Nang receives an online order for 3 T-shirts (Order Capture). They verify the customer’s information and check inventory (Validation & Verification) before sending the order to the warehouse (Fulfillment Triggering). The store syncs data between its website and physical store (Online & Offline Sync) to ensure accurate inventory levels (Unified Inventory View). The customer receives an email notification saying “Order is being shipped” (Order Status Updates), and when the customer returns one T-shirt due to a size mismatch, the store processes a refund quickly (Returns Processing).
Supporting Elements

Supplier Relationship Management (SRM)

Explanation: Building strong relationships with suppliers to ensure long-term collaboration.
  • Supplier Performance Evaluation: Assessing supplier performance.
  • Supplier Development: Helping suppliers improve quality.
  • Collaboration & Innovation: Working together on innovations.
Example: A home appliance manufacturer in Hai Phong evaluates a plastic supplier (Supplier Performance Evaluation) and finds they deliver late 20% of the time. The company helps the supplier improve its production process (Supplier Development) and collaborates to develop an eco-friendly plastic type (Collaboration & Innovation).
Contract Management
Explanation: Managing supplier contracts to ensure compliance and reduce risks.
  • Negotiation Strategies: Negotiating contract terms.
  • Compliance Monitoring: Ensuring contract terms are followed.
  • Risk Assessment: Evaluating risks in contracts.
Example: A logistics company in Hai Duong signs a contract with a truck supplier. They negotiate a 10% discount if trucks are delivered on time (Negotiation Strategies), monitor truck deliveries (Compliance Monitoring), and assess the risk of the supplier going bankrupt (Risk Assessment).
Forecasting
Explanation: Predicting demand to plan production and inventory effectively.
  • Time Series: Forecasting based on historical data.
  • Machine Learning: Using AI for more accurate predictions.
  • Collaborative Forecasting: Working with partners to forecast.
Example: A confectionery company in Long An uses three years of sales data (Time Series) and Machine Learning to predict a 40% increase in mooncake demand in August. They also collaborate with distributors to confirm the forecast (Collaborative Forecasting).
IBP (Integrated Business Planning)
Explanation: Integrating supply, demand, and financial plans for strategic decision-making.
  • Demand, Supply & Finance Integration: Combining data from all departments.
  • Strategic Scenario Modeling: Planning for various scenarios.
  • Executive Review & Alignment: Leadership reviews and approves plans.
Example: A fish sauce manufacturer in Phu Quoc integrates sales, production, and budget data (Demand, Supply & Finance Integration) to plan a 20% production increase. They model a scenario where fish prices rise (Strategic Scenario Modeling), and the leadership team approves the plan (Executive Review & Alignment).
Metrics
Explanation: Metrics to measure supply chain performance.
  • ITR, DOH, DSI, OTB, BOR, FSL, CCL/2C: Metrics like inventory turnover, days on hand, and fill service level.
Example: A retailer in Hue measures its ITR (inventory turnover) at 5, meaning inventory turns over 5 times a year. They also measure DOH (days on hand) at 60 days and aim to reduce it to 45 days for optimization.
Classification
Explanation: Classifying inventory for efficient management.
  • ABC Analysis: Categorizing items into A (high value), B (medium), and C (low value).
  • FSN, VED, HML: Classifying by frequency, value, and importance.
  • Newsvendor Model: Managing inventory with uncertain demand.
Example: An electronics store in Quang Ninh uses ABC Analysis, placing TVs in group A (high revenue), fans in group B, and light bulbs in group C. They also use VED to prioritize air conditioners (essential) over decorative lights (non-essential).
Risk & Compliance
Explanation: Managing risks and ensuring regulatory compliance.
  • Risk Management:
    • Disruption Mapping: Identifying risk points.
    • Contingency Planning: Preparing backup plans.
    • Multi-Sourcing: Using multiple suppliers.
  • Compliance:
    • Trade Regulations: Following trade laws.
    • Customs Duties: Paying import/export taxes.
    • Ethical Standards: Upholding ethical practices.
Example: A coffee exporter in Dak Lak identifies a risk of supply shortages due to weather (Disruption Mapping) and plans to source coffee from Lam Dong if needed (Contingency Planning). They also use three suppliers instead of one (Multi-Sourcing) and ensure compliance with export taxes (Customs Duties).
Cybersecurity
Explanation: Protecting supply chain data from cyber threats.
  • Data Protection: Securing customer and supplier data.
  • Threat Monitoring: Detecting cyber attacks.
  • Incident Response: Handling cyber incidents.
Example: A logistics company in Dong Nai encrypts customer data (Data Protection) and uses software to detect unauthorized access (Threat Monitoring). When a cyberattack occurs, they quickly restore data from a backup (Incident Response).
I hope this content is helpful for your BSD Blog article! Let me know if you need any adjustments or additional details.
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