Supply
Chain
Management (SCM)
Supply Chain Management, or
simply
"SCM",
is the management of the two-way
flow
of materials, equipment,
finances, information, and manpower resources within and among
organizations to ensure the efficient and fast delivery of goods and
services to the end customer. It involves the oversight of
synchronized movement
of these logistics from the supplier to the manufacturer, wholesaler,
and retailer, until the end-product reaches the consumer.
Michael Dell
didn't build his multi-billion empire simply by selling computers to
consumers. He solved the complex problems of just-in-time
manufacturing, inventory reduction, and efficient manufacture and
delivery of goods to outdo his competitors. In short, he came out
on top because he was a master of supply chain management.
Supply chain
management was never a strategic issue in the past, when sourcing and
delivery of logistics took a backseat to manufacturing. The
emergence of new information technologies, however, changed the business
landscape. Now organizations have the necessary tools to do
business at a
much faster
rate.
Companies that do not move their goods and information around quickly
enough do not survive because they simply don't get their new products
to the marketplace before their competitors do.
A basic
supply chain management system has
five (5) components:
1) the
plan,
which refers to the over-all strategy of the SCM program including the
development of SCM metrics to monitor; 2) the
source,
which refers to the suppliers who'll
provide you with goods and services necessary for you to run your
business; 3) the
'make'
or manufacturing component, which refers to the execution of processes
needed to produce, test, and package your products or services; 4) the
delivery,
which refers to the system for receiving orders from customers,
developing a network of warehouses; getting the products to the
customers; invoicing customers and receiving payment from them; and 5)
the
return,
which is the system for processing customer returns and/or supporting
customers with problems with the products they received.
The choice of
the right software in setting up an effective SCM system is crucial.
There are two major classes of SCM software, i.e.,
supply chain
planning
(SCP) software and
supply chain
execution
(SCE) software. SCP software is used to determine the best or most
logical way to fill customer orders, while SCE software is used to track
the physical location or status of goods and materials, and manage their
flows effectively. The SCM software package selected must include
both the aspects of planning and execution.
Software that
can transfer data
'upstream'
(or to the
company's suppliers) and
'downstream'
(or to the company's customers or clients) would allow management of the
entire supply chain under a single system. Large companies dealing
with a multitude of diverse entities might also do better with SCM
software that are based on open models, i.e., those that support sharing
of data internally and externally across different database systems or
data warehouses at various sites. Web-based SCM software are becoming
more and more popular for this purpose.
SCM software
are not simple, and are even often fragmented. This is because SCM
per se is composed of dozens of independent, specific tasks that are
best served with their own software. As a result, most of the
SCM-related software in the market are actually
individual
applications
that cater to the various components of SCM. This is why SCP and
SCE software are often referred to as supply chain planning and
execution applications, respectively. A complete SCM software
package that unifies all the necessary SCM components together has yet
to be seen.
SCP software
employs complex mathematical algorithms to identify the
best flow
of materials to make the supply chain efficient. SCP itself has
various components, the most complex and valuable of which is probably
the demand planning software. Demand planning is simply the
process of determining which products and how much of these must be
produced at which particular point in time so that all customer orders
will be fulfilled or served promptly.
Needless to
say, the accuracy of SCP software is largely dependent on the
accuracy
and
freshness
of the data it is using. Thus, in order to have effective SCP, the
system must have a dependable process for collecting
up-to-date
information about customer orders, production status, and sales and
delivery fulfillments.
SCE software
are designed to
automate
the various steps or processes of the supply chain. For instance,
one of its components may be an application program that electronically
orders goods and services from various suppliers so that the ordered
products may be produced, based on the customer orders that need to be
filled.
Related to
the concept of supply chain management is the concept of supply chain
collaboration.
Supply chain
collaboration (SCC)
refers to a
strategic partnership between two different companies and organizations
that agree to hook up their supply chain management systems together in
order to make the delivery of products from the supplying company to the
receiving company virtually seamless. Procter and Gamble and
Walmart have greatly benefited from such an arrangement, with their SCC
system efficiently modulating how P&G restocks Walmart's distribution
centers with its products.
An effective
SCM program is not easy to implement. Common
obstacles
to setting up an SCM system include: 1) gaining the trust of suppliers
and partners to participate in the SCM program; 2) difficulty of
integrating various processes and systems along the supply chain; 3)
internal resistance to change due to the perceived additional work that
comes with the program; 4) possible discouragement and loss of
confidence in the system due to early mistakes during the learning
curve.
See Also:
Knowledge Management;
CRM; TQM; Kaizen
HOME
Copyright
©
2005
EESemi.com.
All Rights Reserved.
|