Supply Chain Management

Contents

• 1Introduction
• 2What is Supply Chain Management?
• 3What does supply chain management software do?
• 4What is the relationship between ERP, CRM and SCM?
• 5What is the goal of installing supply chain management software?
• 6Key Features of Supply Chain Management
• 7Advantages of SCM
• 8Disadvantages of SCM

If your company makes a product from parts purchased from suppliers, and those products are sold to customers, then you have a supply chain. Some supply chains are simple, while others are rather complicated. The complexity of the supply chain will vary with the size of the business and the intricacy and numbers of items that are manufactured. SCM is the acronym for the term “Supply Chain Management”.

Supply Chain Management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

What is Supply Chain Management ?

Supply chain management (SCM) is a process used by companies to ensure that their supply chain is efficient and cost-effective. A supply chain is the collection of steps that a company takes to transform raw components into the final product. The following are five basic components of SCM.

1. Plan
2. Develop (Source)
3. Make
4. Deliver
5. Return.

Plan

The first stage in supply chain management is known as plan. A plan or strategy must be developed to address how a given good or service will meet the needs of the customers. A significant portion of the strategy should focus on planning a profitable supply chain.

This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.

Develop (Source)

Develop is the next stage in supply chain management .It involves building a strong relationship with suppliers of the raw materials needed in making the product the company delivers. This phase involves not only identifying reliable suppliers but also planning methods for shipping, delivery, and payment.

Companies must choose suppliers to deliver the goods and services they need to create their product. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And then, SCM managers can put together processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments.

Make

At the third stage, make, the product is manufactured, tested, packaged, and scheduled for delivery. This is the manufacturing step. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chain - one where companies are able to measure quality levels, production output and worker productivity.

Deliver

Then, at the logistics phase, customer orders are received and delivery of the goods is planned. This fourth stage of supply chain management stage is aptly named deliver.

This is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

Return

The final stage of supply chain management is called return. As the name suggests, during this stage, customers may return defective products. The company will also address customer questions in this stage.

This can be a problematic part of the supply chain for many companies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers and supporting customers who have problems with delivered products.

To ensure that the supply chain is operating as efficient as possible and generating the highest level of customer satisfaction at the lowest cost, companies have adopted Supply Chain Management processes and associated technology. Supply Chain Management has three levels of activities that different parts of the company will focus on: strategic; tactical; and operational.

Strategic

At this level, company management will be looking to high level strategic decisions concerning the whole organization, such as the size and location of manufacturing sites, partnerships with suppliers, products to be manufactured and sales markets.

Strategic activities include building relationships with suppliers and customers, and integrating information technology (IT) within the supply chain.

Tactical

Tactical decisions focus on adopting measures that will produce cost benefits such as using industry best practices, developing a purchasing strategy with favored suppliers, working with logistics companies to develop cost effect transportation and developing warehouse strategies to reduce the cost of storing inventory.

Studying competitors and making decisions regarding production and delivery would fall under the tactical category.

Operational

Decisions at this level are made each day in businesses that affect how the products move along the supply chain. Operational decisions involve making schedule changes to production, purchasing agreements with suppliers, taking orders from customers and moving products in the warehouse.

The operational category includes the daily management of the supply chain, including the making of production schedules.

Supply chain management software is possibly the most fractured group of software applications on the planet. Each of the five major supply chain steps previously outlined is comprised of dozens of specific tasks, many of which have their own specific software.

Some vendors have assembled many of these different chunks of software together under a single roof, but no one has a complete package that is right for every company.

It's worth mentioning that the old adage about systems only being as good as the information that they contain applies doubly to SCM. If the information entered into a demand forecasting application is not accurate, then you will get an inaccurate forecast. Similarly, if employees bypass the supply chain systems and try to manage things manually (using the fax machine or spreadsheets), then even the most expensive systems will provide an incomplete picture of what is happening in a company's supply chain.

What is the relationship between ERP, CRM and SCM?

Many SCM applications are reliant upon the kind of information that is stored inside enterprise resource planning (ERP) software and, in some cases, to some customer relationship management (CRM) packages.

Theoretically a company could assemble the information it needs to feed the SCM applications from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable basis from all the areas of the company.

ERP is the battering ram that integrates all that information in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information.

Most CIOs who have tried to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the information they need without doing ERP first.

These days, most ERP vendors have SCM modules, so doing an ERP project may be a way to kill two birds with one stone. In addition, the rise and importance of CRM systems inside companies today puts even more pressure on a company to integrate all of its enterprisewide software packages. Companies will need to decide if these products meet their needs or if they need a more specialized system.

Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around the company, so they tend to be independent of the ERP decision. But chances are, companies will need to have these applications communicate with ERP in some fashion.

It's important to pay attention to the software's ability to integrate with the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if a company wants to build a private website for communicating with their customers and suppliers, the company will want to pull information from ERP and supply chain applications together to present updated information about orders, payments, manufacturing status and delivery.

What is the goal of installing supply chain management software?

Before the Internet came along, the aspirations of supply chain software devotees were limited to improving their ability to predict demand from customers and make their own supply chains run more smoothly. But the cheap, ubiquitous nature of the Internet, along with its simple, universally accepted communication standards, have thrown things wide open.

Now, companies can connect their supply chain with the supply chains of their suppliers and customers together in a single vast network that optimizes costs and opportunities for everyone involved. This was the reason for the B2B explosion; the idea that everyone a company does business with could be connected together into one big happy, cooperative family.

Of course, reality isn't quite that happy and cooperative. But today most companies share at least some data with their supply chain partners. The goal of these projects is greater supply chain visibility. The supply chain in most industries is like a big card game: the players don't want to show their cards because they don't trust anyone else with the information, but if they showed their hands they could all benefit.

Suppliers wouldn't have to guess how many raw materials to order, and manufacturers wouldn't have to order more than they need from suppliers to make sure they have enough on hand if demand for their products unexpectedly increases. And retailers would have fewer empty shelves if they shared the information they had about sales of a manufacturer's product in all their stores with the manufacturer.

The Internet makes showing your hand to others possible, but centuries of distrust and lack of coordination within industries make it difficult.

The payoff of timely and accurate supply chain information is the ability to make or ship only as much of a product as there is a market for. This is the practice known as just-in-time manufacturing, and it allows companies to reduce the amount of inventory that they keep. This can cut costs substantially, since you no longer need to pay to produce and store excess goods. But many companies and their supply chain partners have a long way to go before that level of supply chain flexibility can be achieved.

Key Features of Supply Chain Management

Supply chain softwares are robust, feature-rich technology softwares that enhance operations from end-to-end.

Today’s popular supply chain softwares can help companies achieve and maintain a competitive edge by empowering them to streamline and enhance their most important supply chain operations from start to finish. With supply chain software in place, organizations can maximize cost-efficiency, increase productivity, and give their bottom line a big boost.

This functionality is designed to fully automate and support supply chain processes from end-to-end, and includes:

Inventory Management

With a supply chain package, companies can significantly improve the way they track and manage their supplies of raw materials and components needed for production, finished goods to satisfy open sales orders, and spare parts required for field service and support. This eliminates excess and waste, frees up valuable real estate for other important purposes, and minimizes related storage costs.

Order Management

Supply chain software can dramatically accelerate the execution of the entire order-to-delivery cycle by helping companies to more productively generate and track sales orders. Supply chain also enables the dynamic scheduling of supplier deliveries to more effectively meet demand, and more rapid creation of pricing and product configurations.

Procurement

All activities and tasks associated with sourcing, purchasing, and payables can be fully automated and streamlined across a company’s entire supplier network with a supply chain software package. As a result, businesses can build stronger relationships with vendors, better assess and manage their performance, and improve negotiations to leverage volume or bulk discounts and other cost-cutting measures.

Logistics

As companies expand globally, their supply chains become more and more complex. This makes the coordination of the numerous warehouses and transportation channels involved quite a challenging endeavor without supply chain software in place. With supply chain, businesses can improve on-time delivery performance and boost customer satisfaction by achieving complete visibility into how finished goods are stored and distributed, regardless of the number of facilities or partners that participate.

Forecasting and Planning

With supply chain software, organizations can more accurately anticipate customer demand, and plan their procurement and production processes accordingly. As a result, they can avoid unnecessary purchases of raw-materials, eliminate manufacturing over-runs, and prevent the need to store excess finished goods, or slash prices to move products off of warehouse shelves.

Return Management

Supply chain software can simplify and accelerate the inspection and handling of defective or broken goods - on both the buy and sell side of the business - and automate the processing of claims with suppliers and distributors, as well as insurance companies.

Many supply chain offerings also include add-on options or modules designed to enhance related activities. Through these features, support is provided for a variety of important processes such as contract management, product lifecycle management, capital asset management ,and more.

Advantages of SCM

Supply chain software provides numerous advantages to organizations, empowering them to improve operations from end-to-end.

Key Benefits of Supply Chain Management Software:

• Improve Your Supply Chain Network
• Minimized Delays
• Enhanced Collaboration
• Reduced Costs.