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Supply chain management Supply chain management Document Transcript

  • Supply Chain Management (SCM)HCL Enterprise Application Services (EAS) provides robust Supply Chain Management solutions withadvanced features and benefits helping organizations to generate value and enable their businessthrough a more adaptive supply chain network thus reducing inventory whilst increasing service quality.For example our SCM solution provides functionality for manufacturing where planning and logisticsmakes your business network both agile and seamless. Deployment of SCM provides collaboration,planning, execution and monitoring of activities across the supply chain.HCL EAS’s solutions include:Advanced Planner & OptimizerService Parts PlanningSupply Network CollaborationEvent ManagementForecasting and ReplenishmentTransportation ManagementManufacturing Operations and Shop Floor ControlSales and Operations PlanningHCL EAS’s added value:Maximize return on assets through optimization of demand and supplyPlanning and collaboration with business partners through forecasting, optimizing and scheduling time,materials and resourcesStreamlining distribution, transportation and logistics, with real time planning processesOperational excellence – real time and well informed decision making leading to optimum inventory levelWhat does HCL EAS offer?HCL EAS provides a very experienced and skilled workforce who enables supply chain solutions that helptheir customers extend their ERP suite achieving maximum return on investment. Each consultant deliversexpertise in strategic planning, supply chain transformation, project management and SCM functionaldesign and application configuration.A supply chain is a network of facilities and distribution options that performs thefunctions of procurement of materials, transformation of these materials intointermediate and finished products, and the distribution of these finished productsto customers. Supply chains exist in both service and manufacturing organizations,although the complexity of the chain may vary greatly from industry to industry andfirm to firm.
  • Below is an example of a very simple supply chain for a single product, where rawmaterial is procured from vendors, transformed into finished goods in a single step,and then transported to distribution centers, and ultimately, customers. Realisticsupply chains have multiple end products with shared components, facilities andcapacities. The flow of materials is not always along an arborescent network, variousmodes of transportation may be considered, and the bill of materials for the end itemsmay be both deep and large.Traditionally, marketing, distribution, planning, manufacturing, and the purchasingorganizations along the supply chain operated independently. These organizationshave their own objectives and these are often conflicting. Marketings objective ofhigh customer service and maximum sales dollars conflict with manufacturing anddistribution goals. Many manufacturing operations are designed to maximizethroughput and lower costs with little consideration for the impact on inventory levelsand distribution capabilities. Purchasing contracts are often negotiated with very littleinformation beyond historical buying patterns. The result of these factors is that thereis not a single, integrated plan for the organization---there were as many plans asbusinesses. Clearly, there is a need for a mechanism through which these differentfunctions can be integrated together. Supply chain management is a strategy throughwhich such an integration can be achieved.Supply chain management is typically viewed to lie between fully verticallyintegrated firms, where the entire material flow is owned by a single firm, and thosewhere each channel member operates independently. Therefore coordination betweenthe various players in the chain is key in its effective management. Cooper and Ellram[1993] compare supply chain management to a well-balanced and well-practiced relayteam. Such a team is more competitive when each player knows how to be positionedfor the hand-off. The relationships are the strongest between players who directly passthe baton, but the entire team needs to make a coordinated effort to win the race.Supply Chain DecisionsWe classify the decisions for supply chain management into two broad categories --strategic and operational. As the term implies, strategic decisions are made typicallyover a longer time horizon. These are closely linked to the corporate strategy (theysometimes {it are} the corporate strategy), and guide supply chain policies from a
  • design perspective. On the other hand, operational decisions are short term, andfocus on activities over a day-to-day basis. The effort in these type of decisions is toeffectively and efficiently manage the product flow in the "strategically" plannedsupply chain.There are four major decision areas in supply chain management: 1) location, 2)production, 3) inventory, and 4) transportation (distribution), and there are bothstrategic and operational elements in each of these decision areas.Location DecisionsThe geographic placement of production facilities, stocking points, and sourcingpoints is the natural first step in creating a supply chain. The location of facilitiesinvolves a commitment of resources to a long-term plan. Once the size, number, andlocation of these are determined, so are the possible paths by which the productflows through to the final customer. These decisions are of great significance to afirm since they represent the basic strategy for accessing customer markets, and willhave a considerable impact on revenue, cost, and level of service. These decisionsshould be determined by an optimization routine that considers production costs,taxes, duties and duty drawback, tariffs, local content, distribution costs, productionlimitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thoroughdiscussion of these aspects.) Although location decisions are primarily strategic, theyalso have implications on an operational level.Production DecisionsThe strategic decisions include what products to produce, and which plants toproduce them in, allocation of suppliers to plants, plants to DCs, and DCs tocustomer markets. As before, these decisions have a big impact on the revenues,costs and customer service levels of the firm. These decisions assume the existenceof the facilities, but determine the exact path(s) through which a product flows toand from these facilities. Another critical issue is the capacity of the manufacturingfacilities--and this largely depends the degree of vertical integration within the firm. View slide
  • Operational decisions focus on detailed production scheduling. These decisionsinclude the construction of the master production schedules, scheduling productionon machines, and equipment maintenance. Other considerations include workloadbalancing, and quality control measures at a production facility.Inventory DecisionsThese refer to means by which inventories are managed. Inventories exist at everystage of the supply chain as either raw materials, semi-finished or finished goods.They can also be in-process between locations. Their primary purpose to bufferagainst any uncertainty that might exist in the supply chain. Since holding ofinventories can cost anywhere between 20 to 40 percent of their value, theirefficient management is critical in supply chain operations. It is strategic in the sensethat top management sets goals. However, most researchers have approached themanagement of inventory from an operational perspective. These includedeployment strategies (push versus pull), control policies --- the determination of theoptimal levels of order quantities and reorder points, and setting safety stock levels,at each stocking location. These levels are critical, since they are primarydeterminants of customer service levels.Transportation DecisionsThe mode choice aspect of these decisions are the more strategic ones. These areclosely linked to the inventory decisions, since the best choice of mode is oftenfound by trading-off the cost of using the particular mode of transport with theindirect cost of inventory associated with that mode. While air shipments may befast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhileshipping by sea or rail may be much cheaper, but they necessitate holding relativelylarge amounts of inventory to buffer against the inherent uncertainty associatedwith them. Therefore customer service levels, and geographic location play vitalroles in such decisions. Since transportation is more than 30 percent of the logisticscosts, operating efficiently makes good economic sense. Shipment sizes View slide
  • (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling ofequipment are key in effective management of the firms transport strategy.What is Supply Chain Management?The concept of Supply Chain Management is based on two core ideas. The first is that practically everyproduct that reaches an end user represents the cumulative effort of multiple organizations. Theseorganizations are referred to collectively as the supply chain.The second idea is that while supply chains have existed for a long time, most organizations have onlypaid attention to what was happening within their “four walls.” Few businesses understood, much lessmanaged, the entire chain of activities that ultimately delivered products to the final customer. The resultwas disjointed and often ineffective supply chains.Supply chain management, then, is the active management of supply chain activities to maximizecustomer value and achieve a sustainable competitive advantage. It represents a conscious effort by thesupply chain firms to develop and run supply chains in the most effective & efficient ways possible.Supply chain activities cover everything from product development, sourcing, production, and logistics, aswell as the information systems needed to coordinate these activities.The organizations that make up the supply chain are “linked” together through physical flows andinformation flows. Physical flows involve the transformation, movement, and storage of goods andmaterials. They are the most visible piece of the supply chain. But just as important are information flows.Information flows allow the various supply chain partners to coordinate their long-term plans, and tocontrol the day-to-day flow of goods and material up and down the supply chain.Supply chain management (SCM) is the management of a network ofinterconnected businessesinvolved in the provision of product and service packages required by the endcustomers in a supply chain.[2]Supply chain management spans all movement and storage of rawmaterials, work-in-process inventory, and finished goods from point of origin to point of consumption.Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning,execution, control, and monitoring of supply chain activities with the objective of creating net value,building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demandand measuring performance globally."SCM draws heavily from the areas of operations management, logistics, procurement, informationtechnology and strives for an integrated approach.
  • Contents[hide]1 Origin of the term and definitions2 Problems addressed3 Activities/functionso 3.1 Strategico 3.2 Tactical levelo 3.3 Operational level4 Importance5 Historical developmentso 5.1 Creation erao 5.2 Integration erao 5.3 Globalization erao 5.4 Specialization era (phase I): outsourced manufacturing and distributiono 5.5 Specialization era (phase II): supply chain management as a serviceo 5.6 Supply chain management 2.0 (SCM 2.0)6 Business process integration7 Theories8 Supply chain centroids9 Tax efficient supply chain management10 Supply chain sustainability11 Componentso 11.1 Management componentso 11.2 Reverse supply chain12 Systems and value13 Global applications14 Certification15 See also16 References17 Notes18 External links[edit]Origin of the term and definitions
  • The term "supply chain management" entered the public domain when Keith Oliver, a consultant at BoozAllen Hamilton, used it in an interview for the Financial Times in 1982. The term was slow to take holdand the lexicon was slow to change. It gained currency in the mid-1990s, when a flurry of articles andbooks came out on the subject. In the late 1990s it rose to prominence as a management buzzword, andoperations managers began to use it in their titles with increasing regularity.[3][4][5]Common and accepted definitions of supply chain management are:Managing upstream and down stream value added flow of materials, final goods and relatedinformation among suppliers; company; resellers; final consumers is supply chain management.Supply chain management is the systematic, strategic coordination of the traditional businessfunctions and the tactics across these business functions within a particular company and acrossbusinesses within the supply chain, for the purposes of improving the long-term performance of theindividual companies and the supply chain as a whole (Mentzer et al., 2001).[6]A customer focused definition is given by Hines (2004:p76) "Supply chain strategies require a totalsystems view of the linkages in the chain that work together efficiently to create customer satisfactionat the end point of delivery to the consumer. As a consequence costs must be lowered throughoutthe chain by driving out unnecessary costs and focusing attention on adding value. Throughputefficiency must be increased, bottlenecks removed and performance measurement must focus ontotal systems efficiency and equitable reward distribution to those in the supply chain adding value.The supply chain system must be responsive to customer requirements."[7]Global supply chain forum - supply chain management is the integration of key business processesacross the supply chain for the purpose of creating value for customers and stakeholders (Lambert,2008).[8]According to the Council of Supply Chain Management Professionals (CSCMP), supply chainmanagement encompasses the planning and management of all activities involvedin sourcing, procurement, conversion, and logistics management. It also includes the crucialcomponents of coordination and collaboration with channel partners, which canbesuppliers, intermediaries, third-party service providers, and customers. In essence, supply chainmanagement integrates supply and demand management within and across companies. Morerecently, the loosely coupled, self-organizing network of businesses that cooperate to provide productand service offerings has been called the Extended Enterprise.A supply chain, as opposed to supply chain management, is a set of organizations directly linked by oneor more of the upstream and downstream flows of products, services, finances, and information from asource to a customer. Managing a supply chain is supply chain management (Mentzer et al., 2001).[6]Supply chain management software includes tools or modules used to execute supply chain transactions,manage supplier relationships and control associated business processes.Supply chain event management (abbreviated as SCEM) is a consideration of all possible events andfactors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutionsdevised.
  • In many cases the supply chain includes the collection of goods after consumer use for recycling.Including 3PL or other gathering agencies as part of the RM re-patriation process is a way of illustratingthe new end-game strategy.[edit]Problems addressedSupply 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); deliveryscheme, e.g., direct shipment, pool point shipping, cross docking, direct store delivery (DSD), closedloop shipping; mode of transportation, e.g., motor carrier, including truckload, Less than truckload(LTL), parcel; railroad; intermodal transport, including trailer on flatcar (TOFC) and container onflatcar (COFC); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); andtransportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or third-party logistics (3PL)).Trade-Offs in Logistical Activities: The above activities must be well coordinated in order toachieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of theactivities is optimized. For example, full truckload (FTL) rates are more economical on a cost perpallet basis than LTL shipments. If, however, a full truckload of a product is ordered to reducetransportation costs, there will be an increase in inventory holding costs which may increase totallogistics costs. It is therefore imperative to take a systems approach when planning logisticalactivities. These trade-offs are key to developing the most efficient and effective Logistics and SCMstrategy.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 entitieswithin the supply chain.Supply chain execution means managing and coordinating the movement of materials, information andfunds across the supply chain. The flow is bi-directional.[edit]Activities/functionsSupply chain management is a cross-function approach including in managing the movement of rawmaterials into an organization, certain aspects of the internal processing of materials into finished goods,and the movement of finished goods out of the organization and toward the end-consumer. Asorganizations strive to focus on core competencies and becoming more flexible, they reduce theirownership of raw materials sources and distribution channels. These functions are increasingly beingoutsourced to other entities that can perform the activities better or more cost effectively. The effect is toincrease the number of organizations involved in satisfying customer demand, while reducingmanagement control of daily logistics operations. Less control and more supply chain partners led to thecreation of supply chain management concepts. The purpose of supply chain management is to improve
  • trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity ofinventory movement.Several models have been proposed for understanding the activities required to manage materialmovements across organizational and functional boundaries. SCOR is a supply chain managementmodel promoted by the Supply Chain Council. Another model is the SCM Model proposed by the GlobalSupply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, andoperational levels. The CSCMP has adopted The American Productivity & Quality Center (APQC)Process Classification FrameworkSMa high-level, industry-neutral enterprise process model that allowsorganizations to see their business processes from a cross-industry viewpoint.[9][edit]StrategicStrategic network optimization, including the number, location, and size of warehousing, distributioncenters, and facilities.Strategic partnerships with suppliers, distributors, and customers, creating communication channelsfor 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 thesupply chain and capacity management activities.Segmentation of products and customers to guide alignment of corporate objectives withmanufacturing and distribution strategy.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.[edit]Tactical levelSourcing 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 throughoutthe enterprise.Milestone payments.Focus on customer demand and Habits.[edit]Operational levelDaily 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 theforecast with all suppliers.Sourcing planning, including current inventory and forecast demand, in collaboration with allsuppliers.
  • 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 atcustomer level by maintaining company loss through insurance company.Managing non-moving, short-dated inventory and avoiding more products to go short-dated.[edit]ImportanceOrganizations increasingly find that they must rely on effective supply chains, or networks, to compete inthe global market and networked economy.[10]In Peter Druckers (1998) new management paradigms,this concept of business relationships extends beyond traditional enterprise boundaries and seeks toorganize entire business processes throughout a value chain of multiple companies.During the past decades, globalization, outsourcing and information technology have enabled manyorganizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supplynetworks in which each specialized business partner focuses on only a few key strategic activities (Scott,1993). This inter-organizational supply network can be acknowledged as a new form of organization.However, with the complicated interactions among the players, the network structure fits neither "market"nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supplynetwork structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can bedecomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in asupply network concentrate on the inputs and outputs of the processes, with little concern for the internalmanagement working of other individual players. Therefore, the choice of an internal management controlstructure is known to impact local firm performance (Mintzberg, 1979).In the 21st century, changes in the business environment have contributed to the development of supplychain networks. First, as an outcome of globalization and the proliferation of multinational companies,joint ventures, strategic alliances and business partnerships, significant success factors were identified,complementing the earlier "Just-In-Time", Lean Manufacturing and Agilemanufacturing practices.[11]Second, technological changes, particularly the dramatic fall in informationcommunication costs, which are a significant component of transaction costs, have led to changes incoordination among the members of the supply chain network (Coase, 1998).Many researchers have recognized these kinds of supply network structures as a new organization form,using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global ProductionNetwork", and "Next Generation Manufacturing System".[12]In general, such a structure can be defined as"a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific tothat collaboration" (Akkermans, 2001).The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001and related standards published jointly by ISO and IEC
  • [edit]Historical developmentsSix major movements can be observed in the evolution of supply chain management studies: Creation,Integration, and Globalization (Movahedi et al., 2009), Specialization Phases One and Two, and SCM2.0.[edit]Creation eraThe term supply chain management was first coined by Keith Oliver in 1982. However, the concept of asupply chain in management was of great importance long before, in the early 20th century, especiallywith the creation of the assembly line. The characteristics of this era of supply chain management includethe need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, andwidespread attention to the Japanese practice of management.[edit]Integration eraThis era of supply chain management studies was highlighted with the development of Electronic DataInterchange (EDI) systems in the 1960s and developed through the 1990s by the introduction ofEnterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st centurywith the expansion of internet-based collaborative systems. This era of supply chain evolution ischaracterized by both increasing value-adding and cost reductions through integration.In fact a supply chain can be classified as a Stage 1, 2 or 3 network. In stage 1 type supply chain, varioussystems such as Make, Storage, Distribution, Material control, etc. are not linked and are independent ofeach other. In a stage 2 supply chain, these are integrated under one plan and is ERP enabled. A stage 3supply chain is one in which vertical integration with the suppliers in upstream direction and customers indownstream direction is achieved. An example of this kind of supply chain is Tesco.[edit]Globalization eraThe third movement of supply chain management development, the globalization era, can becharacterized by the attention given to global systems of supplier relationships and the expansion ofsupply chains over national boundaries and into other continents. Although the use of global sources inthe supply chain of organizations can be traced back several decades (e.g., in the oil industry), it was notuntil the late 1980s that a considerable number of organizations started to integrate global sources intotheir core business. This era is characterized by the globalization of supply chain management inorganizations with the goal of increasing their competitive advantage, value-adding, and reducing coststhrough global sourcing.However it was not until the late 1980s that a considerable number oforganizations started to integrate global sources into their core business.[edit]Specialization era (phase I): outsourced manufacturing and distributionIn the 1990s, industries began to focus on “core competencies” and adopted a specialization model.Companies abandoned vertical integration, sold off non-core operations, and outsourced those functionsto other companies. This changed management requirements by extending the supply chain well beyondcompany walls and distributing management across specialized supply chain partnerships.This transition also re-focused the fundamental perspectives of each respective organization. OEMsbecame brand owners that needed deep visibility into their supply base. They had to control the entiresupply chain from above instead of from within. Contract manufacturers had to manage bills of material
  • with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).The specialization model creates manufacturing and distribution networks composed of multiple,individual supply chains specific to products, suppliers, and customers who work together to design,manufacture, distribute, market, sell, and service a product. The set of partners may change according toa given market, region, or channel, resulting in a proliferation of trading partner environments, each withits own unique characteristics and demands.[edit]Specialization era (phase II): supply chain management as a serviceSpecialization within the supply chain began in the 1980s with the inception of transportation brokerages,warehouse management, and non-asset-based carriers and has matured beyond transportation andlogistics into aspects of supply planning, collaboration, execution and performance management.At any given moment, market forces could demand changes from suppliers, logistics providers, locationsand customers, and from any number of these specialized participants as components of supply chainnetworks. This variability has significant effects on the supply chain infrastructure, from the foundationlayers of establishing and managing the electronic communication between the trading partners to morecomplex requirements including the configuration of the processes and work flows that are essential tothe management of the network itself.Supply chain specialization enables companies to improve their overall competencies in the same waythat outsourced manufacturing and distribution has done; it allows them to focus on their corecompetencies and assemble networks of specific, best-in-class partners to contribute to the overall valuechain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploythis domain-specific supply chain expertise without developing and maintaining an entirely unique andcomplex competency in house is the leading reason why supply chain specialization is gaining popularity.Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken rootprimarily in transportation and collaboration categories. This has progressed from the Application ServiceProvider (ASP) model from approximately 1998 through 2003 to the On-Demand model fromapproximately 2003-2006 to the Software as a Service (SaaS) model currently in focus today.[edit]Supply chain management 2.0 (SCM 2.0)Building on globalization and specialization, the term SCM 2.0 has been coined to describe both thechanges within the supply chain itself as well as the evolution of the processes, methods and tools thatmanage it in this new "era". The growing popularity of collaborative platforms is highlighted by the riseof TradeCard’s supply chain collaboration platform which connects multiple buyers and suppliers withfinancial institutions, enabling them to conduct automated supply chain finance transactions.[13]Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity,information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 bringsis to help navigate the vast amount of information available on the Web in order to find what is beingsought. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It isthe pathway to SCM results, a combination of the processes, methodologies, tools and delivery options toguide companies to their results quickly as the complexity and speed of the supply chain increase due tothe effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles,expanded specialization, near-/far- and off-shoring, and talent scarcity.
  • SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly managefuture change for continuous flexibility, value and success. This is delivered through competencynetworks composed of best-of-breed supply chain domain expertise to understand which elements, bothoperationally and organizationally, are the critical few that deliver the results as well as through intimateunderstanding of how to manage these elements to achieve desired results. Finally, the solutions aredelivered in a variety of options, such as no-touch via business process outsourcing, mid-touch viamanaged services and software as a service (SaaS), or high touch in the traditional software deploymentmodel.WhatAre theAdvantages & Disadvantages for aSupply Chain Management Buyer?By Allison Dodge, eHow ContributorPrint this articleSupply chain management buyers obtain production supplies.Manufacturing, production and assembly companies often employ a supply chainmanagement buyer. This person is responsible for purchasing supplies and goods thecompany needs to produce products. According to the U.S. Bureau of Labor Statistics,more than 500,000 people were employed in this position in the United States and earningan average salary of about $89,000 as of 2008. Using a supply chain management buyerin your organization can have advantages and disadvantages.
  • Other People Are ReadingThe Disadvantages of Global Supply Chain ManagementWhat Is Supply Chain Management & What Are the Advantages of Using It?1. Costo Companies must pay salary and benefits for an employee serving as the supply chainmanagement buyer. This can be a disadvantage for a company because it has the potentialto reduce profits by increasing personnel costs.Productivityo A supply chain management buyer has the potential to increase productivity within anorganization. By doing his job well, the buyer ensures that production or manufacturingnever slows down or comes to a halt because the company is out of supplies to make itsproducts. In addition, an organization can increase its productivity by employing a supplychain management buyer because management staff and executives who had handledpurchasing duties can focus on making the company more profitable.o Sponsored Links SAP Courses & CollegesFind Top SAP Institutes in India. Get Info on Courses,Admision,Fees.www.Shiksha.com/SAP-CoursesSupplieso Supply chain management buyers who are skilled at their job may provide their companywith better supplies to make products, or they may be able to reduce the price the companypays for those supplies. The buyer can negotiate lower costs, bulk purchases or upgrades insupplies, all of which benefit the company that employs him.Unskilled Buyero Employing an unskilled or inexperienced supply chain management buyer can be adisadvantage to a company. She has the potential to wreak havoc on the productivity andprofits of the company if she is incapable of ordering supplies in a timely manner within abudgeted amount. This is why its important for companies to take time to interview andselect the right buyer for their organization.IntroductionIf 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 ofthe 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 ultimateprovision 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 goodsfrom 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 andcost-effective. A supply chain is the collection of steps that a company takes to transform raw components into thefinal product. The following are five basic components of SCM.1. Plan2. Develop (Source)3. Make4. Deliver5. Return.PlanThe first stage in supply chain management is known as plan. A plan or strategy must be developed to address howa given good or service will meet the needs of the customers. A significant portion of the strategy should focus onplanning a profitable supply chain.This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go towardmeeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics tomonitor 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 theraw materials needed in making the product the company delivers. This phase involves not only identifying reliablesuppliers 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 createmetrics for monitoring and improving the relationships. And then, SCM managers can put together processes formanaging their goods and services inventory, including receiving and verifying shipments, transferring them to themanufacturing facilities and authorizing supplier payments.MakeAt the third stage, make, the product is manufactured, tested, packaged, and scheduled for delivery. This is themanufacturing step. Supply chain managers schedule the activities necessary for production, testing, packaging andpreparation for delivery. This is the most metric-intensive portion of the supply chain - one where companies are ableto measure quality levels, production output and worker productivity.DeliverThen, at the logistics phase, customer orders are received and delivery of the goods is planned. This fourth stage ofsupply 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 fromcustomers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicingsystem to receive payments.ReturnThe final stage of supply chain management is called return. As the name suggests, during this stage, customersmay 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 aresponsive and flexible network for receiving defective and excess products back from their customers andsupporting 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 customersatisfaction at the lowest cost, companies have adopted Supply Chain Management processes and associatedtechnology. Supply ChainManagement has three levels of activities that different parts of the company will focus on:strategic; tactical; and operational.
  • StrategicAt this level, company management will be looking to high level strategic decisions concerning the wholeorganization, such as the size and location of manufacturing sites, partnerships with suppliers, products to bemanufactured and sales markets.Strategic activities include building relationships with suppliers and customers, and integrating information technology(IT) within the supply chain.TacticalTactical 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 effecttransportation 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.OperationalDecisions 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, takingorders from customers and moving products in the warehouse.The operational category includes the daily management of the supply chain, including the making of productionschedules.What does supply chain management software do?Supply chain management software is possibly the most fractured group of software applications on the planet. Eachof the five major supply chain steps previously outlined is comprised of dozens of specific tasks, many of which havetheir own specific software.Some vendors have assembled many of these different chunks of software together under a single roof, but no onehas a complete package that is right for every company.Its worth mentioning that the old adage about systems only being as good as the information that they containapplies doubly to SCM. If the information entered into a demand forecasting application is not accurate, then you willget an inaccurate forecast. Similarly, if employees bypass the supply chain systems and try to manage thingsmanually (using the fax machine or spreadsheets), then even the most expensive systems will provide an incompletepicture of what is happening in a companys 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 resourceplanning (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 toget 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 fromhaving 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 waysto 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 onestone. In addition, the rise and importance of CRM systems inside companies today puts even more pressure on acompany to integrate all of its enterprisewide software packages. Companies will need to decide if these productsmeet 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 fromaround the company, so they tend to be independent of the ERP decision. But chances are, companies will need tohave these applications communicate with ERP in some fashion.
  • Its important to pay attention to the softwares ability to integrate with the Internet and with ERP applications becausethe Internet will drive demand for integrated information. For example, if a company wants to build a private websitefor communicating with their customers and suppliers, the company will want to pull information from ERP and supplychain applications together to present updated information about orders, payments, manufacturing status anddelivery.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 theirability 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 thrownthings wide open.Now, companies can connect their supply chain with the supply chains of their suppliers and customers together in asingle vast network that optimizes costs and opportunities for everyone involved. This was the reason for the B2Bexplosion; the idea that everyone a company does business with could be connected together into one big happy,cooperative family.Of course, reality isnt quite that happy and cooperative. But today most companies share at least some data withtheir supply chain partners. The goal of these projects is greater supply chain visibility. The supply chain in mostindustries is like a big card game: the players dont want to show their cards because they dont trust anyone elsewith the information, but if they showed their hands they could all benefit.Suppliers wouldnt have to guess how many raw materials to order, and manufacturers wouldnt have to order morethan they need from suppliers to make sure they have enough on hand if demand for their products unexpectedlyincreases. And retailers would have fewer empty shelves if they shared the information they had about sales of amanufacturers 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 withinindustries 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 asthere is a market for. This is the practice known as just-in-time manufacturing, and it allows companies to reduce theamount of inventory that they keep. This can cut costs substantially, since you no longer need to pay to produce andstore excess goods. But many companies and their supply chain partners have a long way to go before that level ofsupply chain flexibility can be achieved.Key Features of Supply Chain ManagementSupply 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 byempowering them to streamline and enhance their most important supply chain operations from start to finish. Withsupply chain software in place, organizations can maximize cost-efficiency, increase productivity, and give theirbottom line a big boost.This functionality is designed to fully automate and support supply chain processes from end-to-end, and includes:Inventory ManagementWith a supply chain package, companies can significantly improve the way they track and manage their supplies ofraw materials and components needed for production, finished goods to satisfy open sales orders, and spare partsrequired for field service and support. This eliminates excess and waste, frees up valuable real estate for otherimportant purposes, and minimizes related storage costs.Order ManagementSupply chain software can dramatically accelerate the execution of the entire order-to-delivery cycle by helpingcompanies to more productively generate and track sales orders. Supply chain also enables the dynamic schedulingof supplier deliveries to more effectively meet demand, and more rapid creation of pricing and product configurations.ProcurementAll activities and tasks associated with sourcing, purchasing, and payables can be fully automated and streamlinedacross 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 toleverage volume or bulk discounts and other cost-cutting measures.LogisticsAs companies expand globally, their supply chains become more and more complex. This makes the coordination ofthe numerous warehouses and transportation channels involved quite a challenging endeavor without supply chainsoftware in place. With supply chain, businesses can improve on-time delivery performance and boost customersatisfaction by achieving complete visibility into how finished goods are stored and distributed, regardless of thenumber of facilities or partners that participate.Forecasting and PlanningWith supply chain software, organizations can more accurately anticipate customer demand, and plan theirprocurement 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 tomove products off of warehouse shelves.Return ManagementSupply chain software can simplify and accelerate the inspection and handling of defective or broken goods - on boththe buy and sell side of the business - and automate the processing of claims with suppliers and distributors, as wellas insurance companies.Many supply chain offerings also include add-on options or modules designed to enhance related activities. Throughthese features, support is provided for a variety of important processes such as contract management, productlifecycle management, capital asset management ,and more.Advantages of SCMSupply chain software provides numerous advantages to organizations, empowering them to improve operationsfrom end-to-end.Key Benefits of Supply Chain Management Software:Improve Your Supply Chain NetworkMinimized DelaysEnhanced CollaborationReduced Costs.Disadvantages of SCMThe biggest disadvantage of global supply chain management is the heavy investment of time, money, and resourcesneeded to implement and overlook the supply chain