Supply Chain Management System
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What is the Supply Chain Management (SCM)
Within the organisation, the supply chain refers to a wide range of functional areas. These
include Supply Chain Management-related activities such as inbound and outbound
transportation, warehousing, and inventory control. Sourcing, procurement, and supply
management fall under the supply-chain umbrella, too. Forecasting, production planning
and scheduling, order processing, and customer service all are part of the process as well.
Importantly, it also embodies the information systems so necessary to monitor all of these
activities.
Simply stated, "the supply chain encompasses all of those activities associated with
moving goods from the raw-materials stage through to the end user."
Advocates for this business process realised that significant productivity increases could
only come from managing relationships, information, and material flow across enterprise
borders. One of the best definitions of supply-chain management offered to date comes
from Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at
Ohio State University. LaLonde defines supply-chain management as follows: "The
delivery of enhanced customer and economic value through synchronised management of
the flow of physical goods and associated information from sourcing to consumption. "As
the "from sourcing to consumption" part of our last definition suggests, though, achieving
the real potential of supply-chain management requires integration--not only of these
entities within the organisation, but also of the external partners. The latter include the
suppliers, distributors, carriers, customers, and even the ultimate consumers. All are
central players in what James E. Morehouse of A.T. Kearney calls the extended supply
chain. "The goal of the extended enterprise is to do a better job of serving the ultimate
consumer,". Superior service, he continues, leads to increased market share. Increased
share, in turn, brings with it competitive advantages such as lower warehousing and
transportation costs, reduced inventory levels, less waste, and lower transaction costs.
The customer is the key to both quantifying and communicating the supply chain's value,
confirms Shrawan Singh, vice president of integrated supply-chain management at Xerox.
"If you can start measuring customer satisfaction associated with what a supply chain can
do for a customer and also page link customer satisfaction in terms of profit or revenue
growth," Singh explains, "then you can attach customer values to profit & loss and to the
balance sheet."
The best companies around the world are discovering a
powerful new source of competitive advantage. It's called
supply-chain management and it encompasses all of those
integrated activities that bring product to market and create
satisfied customers.
The Supply Chain Management Program integrates topics from
manufacturing operations, purchasing, transportation, and
physical distribution into a unified program. Successful supplychain
management, then, coordinates and integrates all of these
activities into a seamless process. It embraces and links all of
the partners in the chain. In addition to the departments within
the organization, these partners include vendors, carriers, thirdparty
companies, and information systems providers.
Supply Chain Management Today
If we take the view that Supply Chain Management is what Supply Chain Management
people do, then in 1997 Supply Chain Management has a firm hand on all aspects of
physical distribution and materials management. Seventy-five percent or more of
respondents included the following activities as part of their company's Supply Chain
Management department functions:
• Inventory management
• Transportation service procurement
• Materials handling
• Inbound transportation
• Transportation operations management
• Warehousing management
Supply Chain Management Tomorrow
The future for Supply Chain Management looks very bright. This year, as well as last
year, two major trends are benefiting Supply Chain Management operations. These are
• Customer service focus
• Information technology
Successful organisations must be excellent in both of these areas, so the importance of
Supply Chain Management and the tools available to do the job right will continue to
expand.
1.1.4 The Supply Chain Management Pipeline
The freight transportation industry has undergone a revolutionary change during the
last decade. As deregulation spread to all modes of transport, the number of surviving
companies declined. Carriers unprotected by regulation discovered they could not
differentiate themselves from the competition on price alone. Successful transportation
companies must provide prompt pickup, excellent customer service, and swift, complete
and damage-free delivery.
The motor carrier industry forges a critical page link in a multimodal Supply Chain
Management system and must compete against time and service to stay in business.
Shippers move cargo over whatever mode provides the best service. Less-than-truckload
(LTL) motor carriers find their competition particularly stiff. Parcel carriers constantly
increase their maximum shipment weight while truck load carriers now accept partial
trailer loads as small as 10,000 pounds.
Shorter cycle times means better service.
Customers' needs have also changed. The growth of Just-in-Time and Quick Response
inventory management and third-party Supply Chain Management requires all
participants in the Supply Chain Management chain to consider shorter cycle time a
competitive advantage. Manufacturers, distributors, and some carriers effectively use
information technology to reduce cycle times and improve the quality of freight handling.
Package handlers use the technology to great competitive advantage.
Co-ordinating Multiple Initiatives through IT
The Supply Chain Management model of LTL carriers offers the greatest advantage and
the fundamental vulnerability of the mode. City terminals, break bulk consolidation,
and other cargo transfer techniques allow LTL carriers to sell economies of scale to
shippers with small cargo consignments. However, the same process requires multiple
handling and offers frequent opportunities for delays, misshipments, and cargo damage.
Effective use of information technology maximises the advantages and minimises the
risks inherent in LTL transportation. Each package must be positively identified every
time it is handled. Information about every destination must be checked and double
checked to maximise cargo speed while minimising empty trailer miles.
Objectives of Supply Chain Management
The fundamental objective is to "add value".
That brings us to the example of the fish fingers. During the Supply Chain Management
'98 conference in the United Kingdom this fall, a participant in a supply chain
management seminar said that total time from fishing dock through manufacturing,
distribution, and final sale of frozen fish fingers for his European grocery-products
company was 150 days. Manufacturing took a mere 43 minutes. That suggests an
enormous target for supply chain managers. During all that time, company capital is--
almost literally in this case--frozen. What is true for fish fingers is true of most products.
Examine any extended supply chain, and it is likely to be a long one.
