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The second major element of supply chain management system isoperations. Having received raw materials, parts, components, assemblies, or services from suppliers, the firm now must transform them and produce the products or the services that meet the needs of its consumers. It must conduct this transformation in an efficient and effective manner for the benefit of the supply chain managementsystem. We will briefly overview those operational activities that most directly relate to supply chain management.One element is demand management. This involves attempting to match demand with capacity. In a manufacturing environment, this may entail a better and more detailed production schedule. In a service environment, it may entail rescheduling customer appointments to better match service provider availability. A key elementis improvements in inventory control, which may be done by using materials requirement planning software or instituting a just-in-time program. Just-in-time attempts to create an inventory system where the inventory arrives exactly when it is needed. Another way of achieving operational Saylor URL: Saylor.org622
efficiency to improve the supply chain management system is by adopting lean methodologies. The essence of lean is attempting to eliminate all forms of waste from a production or service system.The third element of the supply chain management system isdistribution. Distribution involves several activities—transportation (logistics), warehousing, andcustomer relationship management (CRM). The first and most obvious is logistics—the transportation of goods across the entire supply chain. The need to efficiently transport goods has led to a hierarchy of logistics providers. Some arguethat it now consists of a four-party hierarchy. First-party logistics providers are those who wish to ship goods to a particular location. Second-party logistics providers are those businesses that provide the means of transportation, including shipping freight by air, rail, or truck. Second-party logistics providers may also offer warehousing services to temporarily store goods. Third-party logistics providers specialize in offering an array of services to simplify transportation. Theyoffer services that synthesize a variety of services, including the shipping of goods,warehousing, inventory management, and packaging. They also may offer services associated with facilitating customs operation and the resolution of problems associated with international transportation. The range of services can be so extensive that the literature segments third-party logistics providers into four groups. They range from those businesses that pick up and deliver goods to those businesses that essentially perform the entire logistics function for a customer. In the last fifteen years, a fourth level of logistics providers was added tothis hierarchy. Although there is some argument as to what distinguishes