Improvement of Material Flow in the Production and Supply Chain of ...

CHAPTER 6
INVENTORY REDUCTION AND
DELIVERY OPTIMIZATION
Supply chain management is a cross-functional approach to managing the movement of
raw materials into an organization, certain aspects of the internal processing of
materials into finished goods, and then the movement of finished goods out of the
organization toward the end-consumer. (Wikipedia, viewed 2007). So far, this paper
has contained the optimizations of the first two segments in supply chain management.
Relationships between the company and the customers are complicated and the ability
to effectively match demand and supply is fundamental to nearly all supply chain
management processes. As the production volume increases, the balance between the
company and its customer may be destroyed and affect the company’s reputation if the
management of supply chain is not updated together the fluctuation. Besides, the
inventory is another consideration in operation management, which is changing along
with the production volume also and needs to be optimized. In this chapter, authors did
the research based on theories and experiences from successful cases of other
enterprises. Threads and opportunities will be analyzed and then, feasible solutions will
be proposed and evaluated.
6.1 Rules and methods to balance the profit between factory
and customers
The supply chain is the total flow of materials, information and cash, from the
suppliers' suppliers, right through an enterprise to the customers' customers. (Ahmad &
Benson, 1999). Figure 6.1 shows the flows between the supplier and customer. It is
clear that materials flow from the supplier’s supplier to the supplier, which can be the
role of the company here, and then to the company’s customer and to the customer’s
customer. Cash flows in the reverse direction, from the customer to the supplier.
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