Supply Chain Management and Its Types of Supply Chain Management
What is SCM?
Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production to product development to the information systems needed to direct these undertakings.
How Supply Chain Management Works:
SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies are able to cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors.
SCM is based on the idea that nearly every product that comes to market results from the efforts of various organizations that make up a supply chain.
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which consists of five parts:
- The plan or strategy
- The source
- Manufacturing
- Delivery and logistics
- The return system
The supply chain manager tries to minimize shortages and keep costs down. The job is not only about logistics and purchasing inventory.
Example of SCM:
Understanding the importance of SCM to its business, Walgreens Boots Alliance Inc. placed focused effort on transforming its supply chain in 2016. The company operates one of the largest pharmacy chains in the United States and needs to efficiently manage and revise its supply chain so it stays ahead of the changing trends and continues to add value to its bottom line.
According to the news as of July 5, 2016, Walgreens has supposedly invested in the technology part of its supply chain. It also implemented a forward looking SCM that basically takes relevant data and uses their analytics to forecast customer purchase behavior in advance helping them know the demand of a particular product well in advance. This way it backs up its supply chain to meet the expected demand.
Types of SCM Management Systems:
1) Supply Chain Planning Systems
These systems provide information that helps businesses in the planning of their supply chain. Some of the important supply chain planning functions are as follows:
· Forecasting demand for specific products and preparing sourcing and manufacturing plan for those products
· Estimating the quantity of the product to be manufactured in a given time period
· Deciding the location where the finished goods are to be stored
· Identifying the transportation mode to be used for delivering the products
· Setting the inventory levels for raw materials, intermediate products, and finished goods.
· Determining the product quantity a business should make in order to meet all its customer demands.
2) Supply Chain Execution Systems
These systems provide information that helps businesses in the execution of their supply chain steps. Some of the major supply chain execution functions are as follows:
· Managing the flow of products from the manufacturers to distributors to retailers and finally to customers in order to ensure the accurate delivery of the products.
· Providing the needed information about the status of orders being processed so that the vendors could provide the exact delivery dates to customers
· Tracking the shipment and accounting for the products that have been returned or are to be repaired and serviced
Types of Supply Chain Management Tools:
1) Lean Inventory Tools:
The idea behind lean manufacturing includes creating what is needed within the moment, determined by current and projected customer demand. Before lean production, manufacturers would create far too many goods and had an overabundance of product. This resulted in a substantial amount of inefficiency, wasted time, and high inventory costs
2) Shipping Status Tools:
Utilizing shipping status tools such as alerts and updates are extremely popular among supply chain management tools. With high volume supply chains that have various types of cargo being shipped to customers around the world, it is important to always be aware when something goes down or when there is a problem.
3) Order Processing Tools:
Order processing is extremely important to supply chain, in which supply chain management software provides tools needed to make this task easier and more efficient. This variety of tools support all functions across order processing, such as sales order processing, order management, order fulfillment, and more. These supply chain optimization tools automate the activities involved in order processing using EDO and similar technology to directly capture order data.
Conclusion:
SCM involves joint collaboration between outsourcing partners, suppliers and customers. It comprises the transformation of goods from raw materials through to the delivery of the finished product.
It also includes the management of key information flows. SCM basically involves the integration of these activities and aims to improve relationships between various parties while also achieving a sustainable competitive advantage through high quality and lower cost products. SCM is closely linked with enterprise resource planning (ERP) and electronic commerce systems.
Future supply chains are likely to be more dynamic in nature, and consist of collaborative value networks in which productivity and efficiency are constantly maximized. Purchasing firms need to ensure that costs and risks are equitably shared across the supply chain.