Supply Chain Management: The Basics And Beyond (Resource Management)
Supply chain management is the process of delivering a product from raw material to the consumer. It includes supply planning, product planning, demand planning, sales and operations planning, and supply management.
Supply Chain Management: The Basics and Beyond (Resource Management)
Focusing supply chain management on strategic activities can have a positive impact that resounds throughout the business. There are two core areas where supply chain processes and procedures can contribute to business results: customer happiness and ROI.
History-based forecasting is used to drive supply chain planning, but artificial intelligence (AI) and machine learning (ML) are primed to change that forever. AI- and ML-based predictive models will transform processes like demand sensing, shaping, and orchestration, as well as supply planning. AI will begin to drive dynamic pricing, and new product introductions will be based on predictive market intelligence. AI and ML will also drive new models for product promotions management, as well as responses to disruptions in the supply chain. AI and ML predictions will play a key role in the future of supply chain operations and have a transformative effect on other business processes.
Over the years, supply chain management efforts seemingly were hampered by gaps in information: inaccurate demand statements, lack of visibility into current order and supply positions, and incomplete understanding of costs, capabilities, and constraints. Companies were forced to hold excess capacity and inventory as they second-guessed demand projections, delivery schedules, and capacity and material availability across the supply chain.
This renewed interest in supply chain management is well founded. Expanding market reach, greater customer focus, and increasing market and cost pressures are forcing many companies to reevaluate the effectiveness of their supply chains. The increasing compression of concept-to-launch cycles and product life cycles is mandating more flexibility and agility in supply chains than they have ever had before. As many industries undergo difficult transitions, they are focusing more sharply on supply chain partners to improve supply chain capabilities and economics. Collaborative planning, or the cooperation by supply chain partners to achieve more accurate forecasts and plans, is now widely touted as the next revolution in supply chain management.
The eERP movement seems to be well under way. Software vendor SAP AG is strengthening its supply chain management capabilities, having added Logistics Execution Systems in 1999, followed by Advanced Planning and Optimizer (APO), a tactical forecasting and network optimization tool. SAP is currently building collaborative planning capabilities into APO, and is positioning itself as a provider of integrated supply chain management solutions. Similarly, the Oracle Corporation recently added a logistics management module to its suite of tools that already included supply chain management. Companies such as i2 Technologies Inc. and Manugistics Group Inc. are becoming full-suite supply chain solution providers; B2B exchanges are positioning supply chain management as a core value offering; and niche technology vendors are scrambling to build relationships with established enterprise resource planning (ERP) and software companies and IT consultants.
The federated approach requires a far simpler set of technology tools and systems than its Utopian counterpart. The decentralized model calls for a software architecture that supports a layered supply chain management approach, using best-in-class software to support activities within each layer of architecture. The need for massive transaction processing systems and complex tactical planning systems is significantly reduced, as is the need to align business processes and use a common data structure and nomenclature.
But WMS shoppers often trade some product robustness for the promise of iron-clad interoperability, says Jeff Woods, a supply chain management industry analyst at Gartner, a Stamford, Conn.-based technology research firm.
Supply chain management is important because it can help achieve several business objectives. For instance, controlling manufacturing processes can improve product quality, reducing the risk of recalls and lawsuits while helping to build a strong consumer brand. At the same time, controls over shipping procedures can improve customer service by avoiding costly shortages or periods of inventory oversupply. Overall, supply chain management provides several opportunities for companies to improve their profit margins and is especially important for companies with large and international operations.
Ethics has become an increasingly important aspect of supply chain management, so much so that a set of principles called supply chain ethics was born. Consumers and investors are invested in how companies produce their products, treat their workforce, and protect the environment. As a result, companies respond by instituting measures to reduce waste, improve working conditions, and lessen the impact on the environment.
The challenge of supply-chain risk management has been exacerbated by globalization, where even sensitive products like defense systems use raw materials, circuit boards, and related components that may have originated in countries where the system manufacturer did not even know it had a supply chain. This increased complexity has brought with it more potential failure points and higher levels of risk.
An effective supply-chain risk-management governance mechanism is a cross-functional risk board with participants representing every node of the value chain. It typically includes line managers who double-hat as risk owners for their function, giving them ownership of risk identification and mitigation. In most cases, the risk board receives additional support from a central risk-management function, staffed with experts to provide additional guidance on identifying and mitigating risks.
Global supply chains are irreversible, as are the supply-chain risks that globalization has brought with it. Our experience suggests that it is critical for organizations to build robust programs for managing both known and unknown supply-chain risks. Leaders should also recognize that risk management is not merely about setting up processes and governance models, but also entails shifts in culture and mind-sets. By employing these approaches, organizations increase their chances of minimizing supply-chain disruptions and crises, while capturing the full value of their supply-chain strategies.
Supply chain management (SCM) is the management of the processes that control the flow of goods and services within an organization. It includes all processes that turn raw materials into final products. It involves 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 demand, and measuring performance globally.
The three major elements of supply chain management are demand, materials, and resource capacity. The goal of SCM is to increase the cash flow speed by synchronizing business processes based on constraints. Indexes of the management are throughput (item flow), inventory, and expense aiming for total optimization. In short, it's cash flow management.
The Integration Era covers the 1960s through the current day, encompassing significant technological advances for supply chain management. Integration refers to the development of electronic data interchange systems in the 60s, enterprise resource planning systems (ERPs) in the 90s, and the adoption of cloud-based collaboration systems in the 21st century.
The third era is called the Globalization Era, and refers to a period in which supply chains expanded beyond national boundaries into other continents. In the late 1980s, more and more organizations began integrating global sources into their businesses.
Phase II refers to a period when supply planning, collaboration, execution, and performance management began to be integrated into supply chain management. Supply chain managers needed new strategies to address quick and unexpected changes in demand, suppliers, and logistics providers. Supply chain specialization enables companies to improve their competencies by allowing them to focus on their core competencies and assemble networks of specialized partners to improve the performance of the overall supply chain. Outsourced technology hosting for supply chains debuted in the late 1990s under the application service provider model. This progressed to the on-demand model between 2003 and 2006, and to the software as a service model from 2006 to the present day.
The final era is called supply chain management 2.0 (SCM 2.0). SCM 2.0 utilizes solutions designed to deliver results by taking into account the turbulence of future change. This approach guides companies as the complexity and speed of the supply chain increase due to global competition, part price fluctuations, offshoring, talent attrition, and changes to transportation costs.
Supply chain management synchronizes demand with a business unit by using materials, parts, and resources such as machines and workers to increase the flow from materials/parts supply to product selling. The cash flow speed is called throughput. The role of supply chains within manufacturing is to coordinate the flow of materials and resources through a rigorous process that ends up as a product within the hands of a user. This can cover anything from the largest, like aeroplanes, to the smallest, like a phone chip. Within any manufacturing organization, the factory supply chain management workflow holds the highest impact to the bottom line, impacting customer satisfaction and overall costs of the company.
For most of modern manufacturing history, the movements of goods, people, and capital have been primarily regionalized. With the advent of globalization, SCM has become more complex. It is very common for American companies to have manufacturing facilities in Asia or Mexico and customers in many parts of the world. This system has also made it common for companies to outsource many aspects of the supply chain management to specialized third-party organizations around the world.