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Supply Chain Management 101

Written By: David Clark
Published On: November 26 2007

I covered the basics of ERP previously, and thought I'd move on to supply chain management (SCM), which we're also featuring in tomorrow's TEC Newsletter (go to Newsletter archives), with lots of white paper goodness, to boot.

So,

What is SCM?
Supply chain management (SCM) systems coordinate the movement of products and services from suppliers to customers (including manufacturers, wholesalers, and retailers).

These systems are used to manage demand, warehouses, trade logistics, transportation, and facilities, as well as the movement and transformation of materials on their way to customers.

SCM applications link people and organizations (and their activities) to information and resources. The ultimate goal is for all components of the chain to exchange information with maximum efficiency and effectiveness, in order to obtain best results for all parties.

A comprehensive SCM solution allows you to focus on and optimize key components of your supply chain operations:

• demand management
• order management
• warehouse management
• production and supply planning
• service parts planning
• supplier relationship management
• supply chain event management
• international trade logistics
• transportation management

The difference between managing these components effectively and mismanaging them can mean the difference between success and disaster.

Why An Effective SCM Evaluation Process is Vital
IT disasters are not just for SMBs. Even the biggest companies in the world can trip over their supply chains.

In May 2001, Nike announced that sales for the preceding quarter had been $100 million (USD) lower than expected. The official reason, according to Nike? Confusion in its supply chain.

What’s more, as soon as Nike announced its supply chain breakdown, the company's stock plummeted 20 percent—making a $100 million loss look nearly trivial.

Later that year, Cisco announced a $2.2 billion inventory write-off. The culprit, once again: supply chain problems. This fiasco was—and still is—the largest inventory write-off in history.

These debacles are not necessarily the direct result of poor software selection or faulty SCM evaluation—but they are potent reminders that software evaluation can be the single most important factor behind operational success—or organizational failure.

How the Software Selection Process Can Help
• Understand how different applications will improve supply chain delivery, cost performance, and order execution.
• Review warehouse management features and logic for pick, put-away, and replenishment functionality.
• Select vendors that support appropriate transportation management for your region or globally.
• Evaluate collaboration environments and relationship terms and details for partners within your supply chain.
• Ensure the technology integrates across multiple enterprises, in a way that is appropriate for your environment.

7 Benefits of SCM
Selecting the right SCM system can help get you on the right track.

1. Increase your top-line profit growth through supplier collaboration
2. Increase the quality of your customer service
3. Decrease stock-outs
4. Reduce your inventory carrying costs
5. Reduce your operating costs—corporate-wide
6. Create supply chain visibility among your trading partners
7. Respond quickly to changing market conditions—and adjust accordingly

Want to learn more about SCM applications and how to select the right one for your organization? Visit our SCM Evaluation Center, where you'll get the skinny on demand management, supplier relationship management (SRM), supply chain event management, supply chain optimization, transportation management systems, and warehouse management systems (WMS).

Don't forget--you can request other tutorials by leaving comments below.

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