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Supply Chain Management (SCM)

 

Background


The Main benefits of SCM are:

  1. Increased Revenues and Profits: SCM enabled companies are better placed to handle changes in the demand and supply conditions and are able to adjust their production to keep the buyers supplied in all conditions. This increases revenues as there are no missed opportunities in their business.
  2. Reduced Costs: SCM can reduce costs by increasing inventory turnover, managing suppliers better and managing quality costs better thus reducing the cost of product failures. Reduced costs are among the chief benefits of SCM.
  3. Cooperation from Suppliers: In a SCM enabled company no one is screaming about missed shipments at the last moment. Shipment delays can be predicted in advance and factors leading to delays countered. Suppliers are intimated and supported better, regarding the supply and demand situation of the production line. There are no last minute sprints by the suppliers in a SCM enabled enterprise. Suppliers find it easier to work with such an enterprise as such a company will keep them on their toes throughout the production cycle rather than at the last moment.
  4. Uninterrupted Production: In an SCM enabled enterprise production is ideally never interrupted because of unavailability of raw material. SCM makes the Just-in-Time (JIT) concept possible. The production planners are able to see the whole supply chain at any moment and can plan the production to ensure that the production function is optimum and does not unexpectedly fall short of inputs.

Implementing SCM in an Organization:

 

Unfortunately for something that delivers so many benefits, SCM is not an easy concept to implement. This is because SCM cannot exist in a company in vacuum. An SCM enabled company needs the full co-operation of it suppliers and employees because all the business processes are integrated into the supply chain. Many business practices are changed to better harness their efficiencies and many business processes may be discarded entirely, to be outsourced, to a more efficient partner. This is usually called Supply Chain Business Process Integration and is one the most important parts of SCM.

 

After Supply Chain Business Process Integration, is done the whole process can be mapped by a software product so that at any time the Supply chain members are able to look ahead and backwards to predict demand and supply. The software will link each participant with efficient flows of information and will ensure a central store of data so that the experience can be built up and future business activity can learn from the past. SCM data forms a valuable input to Business Intelligence (BI) systems.

 

A good SCM system takes time to be implemented but its benefits will make the effort worth while. Return on Investment (ROI) is usually very easily demonstrated in the case of SCM systems as the before and after scenarios are easily determined.

 

In a world where the buyer tolerance is going down and the expected quality levels are going up, a modern business has no choice but to structure itself according to SCM principles.
 
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