Supply chain management addresses the following problems:
- Distribution network configuration: the number, location, and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks, and customers.
- Distribution strategy: questions of operating control (e.g., centralized, decentralized, or shared); delivery scheme (e.g., direct shipment, pool point shipping, cross docking, direct store delivery, or closed loop shipping); mode of transportation (e.g., motor carrier, including truckload, less than truckload (LTL), parcel, railroad, intermodal transport, including trailer on flatcar (TOFC) and container on flatcar (COFC), ocean freight, airfreight); replenishment strategy (e.g., pull, push, or hybrid); and transportation control (e.g., owner operated, private carrier, common carrier, contract carrier, or third-party logistics (3PL)).
- Trade-offs in logistical activities: The above activities must be coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost-per-pallet basis than are LTL shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs, which may increase total logistics costs. The planning of logistical activities therefore takes a systems approach. These trade-offs are key to developing the most efficient and effective logistics and SCM strategy.
- Information: The integration of processes through the supply chain in order to share valuable information, including demand signals, forecasts, inventory, transportation, and potential collaboration.
- Inventory management: Management of the quantity and location of inventory, including raw materials, work in process (WIP), and finished goods.
- Cash flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.