How the “Make process” plays in supply chain | Explain – process | products | services
How the “Make process” plays in supply chain | Explain
When you talk about making something, we all tend to focus on manufacturing companies. But non-manufacturing businesses make things, too. For example, retail stores make product displays, restaurants make meals, and service companies make experiences. And no matter what you’re making, you have to understand the process in order to manage it well. In the SCOR model, Make is the three top-level process. So let’s look at the role that making products or services plays in your supply chain.
Any time we make a product or service, we also have to make a lot of decisions. For example, we decide what to make, how much to make, how to make it, and when it make it. I call this operations management, but some people call it production management or production planning and control. Operations managers are responsible for many of your company’s assets and their performance is measured by the amount of stuff they’re able to make with the resources they’re given.
An operations manager might run a factory with several expensive machines in it. And their natural tendency is to use those machines to push out as many products as possible. In other words, they want to maximize the utilization of their resources. But every resource has limits and we call these constraints. When operations managers are able to reduce or eliminate the constraints in a process, that allows them to increase their capacity. In other words, it allows them to do even more. And they can use techniques, like Six Sigma, Lean, or the Theory of Constraints, to make those improvements.
From the perspective of supply chain management, companies often need to choose between two different make strategies called push and pull. When a customer places an order, they’re pulling the supply chain. When a company makes a product, they’re pushing the supply chain. If a company makes products before customers have bought them, it’s called a make to stock approach, or a push supply chain. Push can be a risky strategy, because if customers don’t buy the products, then the company will be stuck with the extra inventory. So companies often try to create a pull supply chain, instead. This is sometimes called make to order, or engineered to order.
With pull supply chains, customer demand sets the pace for production, so there’s never a chance for inventory to pile up. But this can be risky, too, because if a company can’t make products fast enough to keep up with demand, then they could lose sales and maybe even lose their customers. The speed and efficiency of your make processes can have a huge impact on your supply chain’s speed, agility, and cost.
Understanding the processes involved in making a product or service helps you focus on the activities that create real value for your customers. By aligning your production strategy with all of your other supply chain processes, you’ll begin to see the huge benefits that come from implementing supply chain management.