by December 4, 2001 0 comments

Knowing, even anticipating and fulfilling your customer’s needs is what SCM (supply-chain management) is about. It covers all stages–sourcing, product design, production, planning, order processing, inventory management, transportation, warehousing, and customer service–involved in moving goods from the raw-material stage to the end user.

The weakest link

SCM solutions integrate manufacturing, ordering, order processing, and other systems of many different organizations into a continuous chain. Any chain is only as strong as its weakest link–all companies (and all departments across a given company) in the chain have to put their full weight behind the system for it to deliver expected results.

The supply-chain cycle begins as you enter a store to buy items. The store gives you pricing and availability information about the product, and stocks its shelves from a distributor. The distributor gets his stocks from a manufacturer and may use trucks from a third party. The manufacturer receives raw materials from a variety of suppliers, who get them from other low-tier suppliers. When you buy stuff from the store, you pay for it. The store conveys point-of-sale data and replenishment orders to the distributor, plus transfers funds to the distributor after the replenishment. The distributor sends the replenishment order in trucks back to the store. Thus, there is a constant flow of money, orders, and information between various parties. It does not help if the product you want is not available when you want, or if in its place, there is excess stock of things no one is ever going to buy. SCM manages the flow between different stages to maximize productivity, and minimize stock outs and overstocking

An SCM solution spans across different companies involved, and the systems used by the different companies should be able to talk to each other. An SCM system is a combination of many applications–demand, inventory, transportation planning–covering the stages in the supply chain. SAP, BAAN, QAD, Peoplesoft, i2, and Manugistics provide supply-chain solutions. Sony, Mahindra, Asian Paints, Samsung, Maruti are some of the companies implementing a SCM

There are, however, obstacles in implementing a successful supply-chain solution–the increase in product variety and demand for customized products. This increases demand uncertainty, making it difficult to forecast demands. Add to this the ever shortening life cycle of products, and you have more and more companies using SCM to stay competitive.

Neelima Vaid

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