SCM – Supply Chain Management
Supply chain management (SCM) 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).
According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes.
Supply chain management must address the following problems:
- Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
- Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); 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 3PL).
- Trade-Offs in Logistical Activities: The above activities must be well 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 less than truckload (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. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.
- Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.
- Inventory Management: 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.
Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.
Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR(Supply Chain Operations Reference) is a supply chain management model promoted by the Supply Chain Council. SCOR links the supply chain to business processes, presenting a simple and powerful process view to the best methods in supply chain management. SCOR allows you to streamline your supply, inventory, and shipping processes, including return, payment and invoicing. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels.
Strategic level :
- Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.
- Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.
- Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.
- Information technology chain operations.
- Where-to-make and make-buy decisions.
- Aligning overall organizational strategy with supply strategy.
- It is for long term and needs resource commitment.
Tactical level :
- Sourcing contracts and other purchasing decisions.
- Production decisions, including contracting, scheduling, and planning process definition.
- Inventory decisions, including quantity, location, and quality of inventory.
- Transportation strategy, including frequency, routes, and contracting.
- Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.
- Milestone payments.
- Focus on customer demand and Habits.
Operational level :
- Daily production and distribution planning, including all nodes in the supply chain.
- Production scheduling for each manufacturing facility in the supply chain (minute by minute).
- Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
- Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
- Inbound operations, including transportation from suppliers and receiving inventory.
- Production operations, including the consumption of materials and flow of finished goods.
- Outbound operations, including all fulfillment activities, warehousing and transportation to customers.
- Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.
- From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.
- Managing non-moving, short-dated inventory and avoiding more products to go short-dated.
Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy.
The key supply chain processes stated by Lambert (2004) are:
- Customer relationship management
- Customer service management
- Demand management style
- Order fulfillment
- Manufacturing flow management
- Supplier relationship management
- Product development and commercialization
- Returns management
Currently there is a gap in the literature available on supply chain management studies. There is no theoretical support for explaining the existence and the boundaries of supply chain management.A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2009) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include:
- Resource-based view (RBV)
- Transaction Cost Analysis (TCA)
- Knowledge-Based View (KBV)
- Strategic Choice Theory (SCT)
- Agency Theory (AT)
- Institutional theory (InT)
- Systems Theory (ST)
- Network Perspective (NP)
- Materials Logistics Management (MLM)
- Just-in-Time (JIT)
- Material Requirements Planning (MRP)
- Theory of Constraints (TOC)
- Performance Information Procurement Systems (PIPS)
- Performance Information Risk Management System (PIRMS)
- Total Quality Management (TQM)
- Agile Manufacturing
- Time Based Competition (TBC)
- Quick Response Manufacturing (QRM)
- Customer Relationship Management (CRM)
- Requirements Chain Management (RCM)
- Available-to-promise (ATP)
- and many more
The Key Benefits of Supply Chain Management Software:
A supply chain software can offer tremendous value to any company that relies on the smooth planning and execution of related operations to achieve long-term profitability and maintain a solid competitive edge. That’s why more and more organizations are purchasing and implementing supply chain applications.
- Improve Your Supply Chain Network
Supply chain softwares provide complete, 360 degree visibility across the entire supply chain network – something that cannot be easily achieved with disjointed manual processes.
With supply chain, users can monitor the status of all activities across all suppliers, production plants, storage facilities, and distribution centers. This enables more effective tracking and management of all related processes, from the ordering and acquisition of raw materials, through manufacturing and shipping of finished goods to customers or retail outlets. So the status of mission-critical activities can be tracked at all times, and potential inefficiencies or problems can be identified and corrected immediately, before they become unmanageable.
- Minimized Delays
Many supply chains – particularly those that haven’t been enhanced with a supply chain application – are plagued by delays that can result in poor relationships and lost business. Late shipments from vendors, slow downs on production lines, and logistical errors in distribution channels are all common issues that can negatively impact a company’s ability to satisfy customer demand for its products.
With supply chain software, all activities can be seamlessly coordinated and executed from start to finish, ensuring much higher levels of on-time delivery across the board.
- Enhanced Collaboration
Imagine having the ability to know exactly what your suppliers and distributors are doing at all times – and vice versa.
Supply chain softwares make that possible, bridging the gap between disparate business softwares at remote locations to dramatically improve collaboration among supply chain partners. With supply chain softwares, all participants can dynamically share vital information – such as demand trend reports, forecasts, inventory levels, order statuses, and transportation plans – in real-time. This type of instantaneous, unhindered communication and data-sharing will help keep all key stakeholders informed, so supply chain processes can run as flawlessly as possible.
- Reduced Costs
A supply chain software can help reduce overhead expenses in a variety of ways. For example, it can:
- Improve inventory management, facilitating the successful implementation of just-in-time stock models, and eliminating the strain on real estate and financial resources caused by the need to store excess components and finished goods
- Enable more effective demand planning, so production output levels can be set to most effectively address customer requirements – without the shortages that result in lost sales, or the waste that drains budgets
- Improve relationships with vendors and distributors, so purchasing and logistics professionals can identify cost-cutting opportunities such as volume discounts.