SCM - Supply Chain Management
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. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chain management system covers everything from production to product development to the information systems needed to direct these undertakings.
Typically, supply chain management solutions attempt to centrally control or link the production, shipment, and distribution of a product. By chain management process, 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.
Supply chain strategy 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. Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operations.
In traditional supply chain management the supply chain manager coordinates the logistics of all aspects of the supply chain which consists of five parts: 1) the plan or strategy; 2) the source (of raw materials or services); 3) manufacturing (focused on productivity and efficiency); 4) delivery and logistics; 5) the return system (for defective or unwanted products).
Improvements in productivity and efficiency go straight to the bottom line of a company and have a real and lasting impact. Good supply chain management keeps companies out of the headlines and away from expensive recalls and lawsuits.
Technology is critical in managing today's supply chains, and every major supply chain management process has a software category dedicated to it. Most vendors of ERP suites offer digital SCM, and there are thousands of niche vendors. Besides managing specific processes, supply chain management network software has an important role to play in tying together the people, processes, and systems that participate in the supply chain.
Other commonly used supply chain management includes:
- a transportation management system (TMS) for managing the transport and storage of goods, especially across global supply chains;
- a warehouse management system (WMS) for all of the activities inside warehouses and distribution centers; and
- an order management system, to handle processing of customer orders through WMS, ERP and TMS systems, at all stages of the supply chain.
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F.A.Q. about SCM - Supply Chain Management
What are the different types of supply chain strategies?
- The "efficient" supply chain model
The efficient supply chain strategy is best suited to industries that are characterized by intense market competition, with several competitors fighting for the same group of customers who may not perceive major differences in their value proposals. In effect, competition is virtually always based almost solely on price.
This supply chain model is well suited for businesses with commoditized products, such as cement and steel.
- The "fast" supply chain model
The fast supply chain is best for companies that produce trendy products with a short lifecycle. From the customer's perspective, the main difference among competitors' value proposals is how well they are able to update product portfolios in accordance with the latest trends. This focuses competition in the market on manufacturers' ability to continuously develop new products they can sell at an affordable price.
Examples of companies that benefit from this supply chain model include those that engage in catalogue sales.It's also appropriate for retailers that sell trendy apparel and whose customers tend to visit stores monthly.
- The "continuous-flow" supply chain model
The main features of the continuous-flow supply chain model are supply and demand stability, with processes scheduled in such a way as to ensure a steady cadence and continuous flow of information and products. This model typically is for a very mature supply chain with a customer demand profile that has little variation. Consequently, the production workload can match demand through a continuous-replenishment model based on a "make to stock" decoupling point, where production is scheduled to replenish predefined stock levels based on a specified reorder point for inventory in the production cycle.
This supply chain process typically works well for businesses with short-shelf-life products, such as dairy products and bread. It is also suitable for manufacturers of intermediate products.
- The "agile" supply chain model
The agile type of supply chain is useful for companies that manufacture products under unique specifications for each customer. This is typically seen in industries that are characterized by unpredictable demand. They use a "make to order" decoupling point, producing the item after receiving the customer's purchase order to avoid manufacturing products that have no certainty of future sales.
This strategy is useful for industries where the company's value proposal is oriented toward offering products "on demand" and with a high service level, such as packaging, chemical specialties, and metal machining services, among others.
- The "custom-configured" supply chain model
The custom-configured supply chain model is characterized by a high degree of relevance of the cost of assets to the total cost, and multiple (potentially unlimited) configurations of the finished product on a unique platform. Competitive positioning is founded on offering a unique configuration of the finished product according to the end consumer's needs.
One example of where this supply chain strategy makes sense is the assembly of personalized products, such as computers and vehicles. Another example is in the paper manufacturing industry, where the decoupling point occurs after the manufacture of the big paper rolls, and the products are customized in the cutting and packaging process.
- The "flexible" supply chain
It is suited for companies that must meet unexpected demand and therefore are faced with high demand peaks and long periods of low workload. This supply chain model is characterized by adaptability, which is the capability to reconfigure internal processes in order to meet a customer's specific need or solve a customer's problem. This model typically is used by service companies that focus on handling unexpected situations, perhaps even including emergencies.
A typical example of this type of supply chain can be found in companies that provide metalworking and machining services for the manufacture of spare parts for industrial customers.
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