Supply Chain Management

Supply chain management (SCM) is the process and activity of sourcing the
raw materials or components an enterprise needs to create a product or
service and deliver that product or service to customers .

 The goal of SCM software is to improve supply chain performance. Timely

and accurate supply chain information allows manufacturers to make and
ship only as much product as can be sold. Effective supply chain systems
help both manufacturers and retailers reduce excess inventory. This
decreases the cost of producing, shipping, insuring, and storing product
that cannot be sold.

 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 chains cover
everything from production to product development to the information
systems needed to direct these undertakings.

 Supply chain management (SCM) is the broad range of activities

required to plan, control and execute a product's flow from materials to
production to distribution in the most economical way possible.

1
  SCM encompasses the integrated planning and execution of processes
required to optimize the flow of materials, information and capital in
functions that broadly include demand planning, sourcing,
production, inventory management and logistics -- or storage and
transportation. Companies use both business strategy and specialized
software in these endeavors to create a competitive advantage.

 Supply chain management is an expansive and complex undertaking

that relies on each partner -- from suppliers to manufacturers and
beyond -- to run well. Because of this, effective supply chain
management also requires change management, collaboration and risk
management to create alignment and communication between all the
participants.

 In addition, supply chain sustainability -- which covers environmental,

social and legal issues, in addition to sustainable procurement -- and the
closely related concept of corporate social responsibility -- which
evaluates a company's effect on the environment and social well-being
-- are areas of major concern for today's companies.

How Supply Chain Management Works

Typically, SCM attempts to centrally control or link the production, shipment,

and distribution of a product. By managing the supply chain, 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.

 SCM 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.

2
In SCM, the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of five parts:

 The plan or strategy

 The source (of raw materials or services)
 Manufacturing (focused on productivity and efficiency)
 Delivery and logistics
 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.

3
 components of SCM
1. Planning
2. Sourcing
3. Making
4. Delivering
5. Returning
6. Enabling

 Planning—Enterprises need to plan and manage all resources required

to meet customer demand for their product or service. They also need
to design their supply chain and then determine which metrics to use in

4
 order to ensure the supply chain is efficient, effective, delivers value to
customers, and meets enterprise goals.
 Sourcing—Companies must choose suppliers to provide the goods and
services needed to create their product. After suppliers are under
contract, supply chain managers use a variety of processes to monitor
and manage supplier relationships. Key processes include ordering,
receiving, managing inventory, and authorizing supplier payments.
 Making—Supply chain managers coordinate the activities required to
accept raw materials, manufacture the product, test for quality, package
for shipping, and schedule for delivery. Most enterprises measure
quality, production output, and worker productivity to ensure the
enterprise creates products that meet quality standards.

 Delivering—Often called logistics, this involves coordinating customer

orders, scheduling delivery, dispatching loads, invoicing customers, and
receiving payments. It relies on a fleet of vehicles to ship product to
customers. Many organizations outsource large parts of the delivery
process to specialist organizations, particularly if the product requires
special handling or is to be delivered to a consumer’s home.

 Returning—The supplier needs a responsive and flexible network to

take back defective, excess, or unwanted products.  If the produce is
defective it needs to be reworked or scrapped.  If the product is simply
unwanted or excess it needs to be returned to the warehouse for sale.
 Enabling—To operate efficiently, the supply chain requires a number of
support processes to monitor information throughout the supply chain
and assure compliance with all regulations. Enabling processes include
finance, HR, IT, facilities, portfolio management, product design, sales,
and quality assurance.

5
Supply chain management processes
Each major phase of a product's movement through the supply chain -- from
materials to production and distribution -- has its own distinct business
processes and disciplines. Most of them began decades ago as paper-based
methods but now are usually handled in specialized software.

 The SCM process starts with figuring out what products customers want
-- the early stages of supply chain planning, traditionally considered one
of the two overarching categories of SCM, along with supply chain
execution.

6
  Supply chain planning starts with demand planning, a process for
gathering historical data, such as past sales, and applying analytics and
statistical modeling to create a forecast or demand plan that the sales
department and operational departments -- such as manufacturing and
marketing -- can agree on. The forecast determines the types and
quantities of products to be manufactured. Some companies perform
demand planning as part of a formalized process called sales and
operations planning (S&OP), which prescribes an iterative process of
data gathering, discussion, reconciling of demand plans with production
plans and management approval. Some companies include S&OP in a
broader process called integrated business planning (IBP) that
incorporates other departments' plans in a single, companywide plan.

 In the next major step, production planning, the company nails down

the specifics of where and how the products called for in the demand
plan will be manufactured. (Production planning is also used in other
industries, such as agriculture and oil and gas.) A more fine-tuned
variation -- typically automated in specialized software --
called advanced planning and scheduling seeks to optimize the
resources that go into production and make them more responsive to
changes in demand.
 Material requirements planning (MRP) is a process dating back to
the '60s that most manufacturers use to ensure sufficient materials and
components (such as subassemblies) are available for use in the
manufacturing process by taking inventory of what's on hand,
identifying gaps and buying or making the remaining items. The central
document in both MRP and production planning is the bill of materials
(BOM), a complete list of the items needed to make a product.

MRP is sometimes done as part of manufacturing resource planning (MRP II)

which broadens the MRP concept to other departments such as HR and
finance. MRP and MRP II were the predecessors of enterprise resource

7
planning (ERP) software, which is designed to integrate the major business
processes of companies in any industry.

 Two complex processes play important roles in most of the major steps
of SCM: inventory management and logistics. Inventory management
consists of various techniques and formulas for ensuring adequate
supply -- from raw materials in a manufacturing plant, perhaps
managed in an MRP system, to packaged goods in a retail store -- for the
least expenditure of time and resources. Manufacturers are faced with a
variety of inventory management issues, many of which involve
coordinating demand planning with inventory at both ends of the
production process. For example, sometimes material requirements
planning leads to more inventory, especially when the system is first
implemented and the manufacturer must work to synchronize MRP
parameters with the inventory already on hand.

 Logistics is everything having to do with transporting and storing goods

from the start of the supply chain, with delivery of parts and materials
to manufacturers, to delivery of finished products to stores or direct to
consumers and even beyond for product servicing, return and recycling
-- a process called reverse logistics. Inventory management is threaded
throughout the logistics process.
 Procurement, sometimes called sourcing, is the process of finding
suppliers for goods, managing those relationships, and acquiring the
goods economically -- along with all the communication, such as sending
out requests for bids, and paperwork, including purchase orders,
invoices, etc. It is a major component of supply chain management,
given how much is bought and sold at all points along the chain. Most
players in the supply chain -- suppliers, manufacturers, distributors and
retailers -- have dedicated procurement staff.

8
Strategic sourcing is an elevated and more sophisticated type of procurement
that aims to optimize a company's sourcing process by taking advantage of its
consolidated purchasing power and align it with overall business goals.

 Supplier relationship management (SRM), in contrast, addresses

sourcing issues by focusing on the suppliers the company deems most
critical to success and systematically strengthening relationships with
them while fostering optimal performance.

Benefits of supply chain management

Supply chain management produces benefits such as new efficiencies, higher
profits, lower costs and increased collaboration. SCM enables companies to
better manage demand, carry the right amount of inventory, deal with

9
disruptions, keep costs to a minimum and meet customer demand in the most
effective way possible. These SCM benefits are achieved through choosing
effective strategies and appropriate software to manage the growing
complexity of today's supply chains.

Importance of supply chain management

SCM has significant impacts on both the enterprise and the consumer.

 Supply chain management activities can improve customer service.

Done effectively, they have the ability to ensure customer satisfaction by
making certain the necessary products are available at the correct
location at the right time. By increasing customer satisfaction levels,
enterprises are able to build and improve customer loyalty.

 SCM also provides a major advantage for companies by decreasing

operating costs. SCM activities can reduce the cost of purchasing,
production and the total supply chain. Lowering costs improves a
company's financial position by increasing profit and cash flow.
Furthermore, following supply chain management best practices can
minimize overuse of large fixed assets -- such as warehouses and
vehicles -- by allowing supply chain experts to redesign their network,
for example, to maintain customer service levels while operating five
warehouses instead of eight, reducing the cost of owning three extra
facilities.

 Perhaps lesser known and underappreciated is SCM's critical role in

society. SCM can help ensure human survival by improving healthcare,
protecting people from climate extremes and sustaining life. People rely
on supply chains to deliver necessities like food and water as well as
medicines and healthcare. The supply chain is also vital to the delivery

10
 of electricity to homes and businesses, providing the energy needed for
light, heat, air conditioning and refrigeration.

 SCM can also improve quality of life by fostering job creation, providing
a foundation for economic growth and improving standards of living. It
provides a multitude of job opportunities, since supply chain
professionals design and control all of the supply chains in a society as
well as manage inventory control, warehousing, packaging and logistics.
Furthermore, a common feature of most poor nations is their lack of
developed supply chains. Societies with strong, developed supply chain
infrastructures -- such as large railroad networks, interstate highway
systems and an array of airports and seaports -- can efficiently exchange
goods at lower costs, allowing consumers to buy more products, thus
providing economic growth and increasing the standard of living.

ERP – A Fast Forward Process In Business

Process
Enterprise resource planning (ERP) is a system of integrated software
applications that standardizes, streamlines and integrates business processes
across finance, human resources, procurement, distribution, and other
departments.

 ERP systems aid the flow of business processes and allow for
communication between a business’s internal departments and external
functions and data.
 Using predictive analytics, modern enterprise resource planning
systems give companies insights into its real-time operations such as
production, inventory management and omnichannel order fulfillment.
 ERP software tracks a business’s resources (raw materials, cash,
employees), overhead and commitments (employee payroll, purchase
orders and customer orders) for individual departments and for the
company as a whole.

11
Business process
A business process is a series of steps performed by a group of
stakeholders to achieve a concrete goal. Each step in a business process
denotes a task that is assigned to a participant. It is the fundamental building
block for several related ideas such as business process management, process
automation, etc.

The importance of business processes

The need for and advantages of a business process are quite apparent in large
organizations. A process forms the lifeline for any business and helps it
streamline individual activities, making sure that resources are put to optimal
use.

Business Strategy and ERP

A business strategy is the roadmap to achieve the company’s business
objectives. Defining & designing a business strategy, ensuring proper

12
implementation, monitoring the results, and ensuring course corrections is
crucial for ensuring business success. An ERP software can play a crucial role
in implementing, monitoring & refining the business strategies, hence a
company should align ERP with the company’s business strategy. Let us now
see, how an efficient ERP Software will help roll out and implement business
strategies and achieve the business objectives.

Business Strategy
Business Strategy is usually a long term business plan to achieve the
objectives over 3-5 years. The business strategy consists of clearly defining
the business goals to be achieved, setting up the course of actions, business
processes, and taking decisions to achieve specified business objectives.

ERP- integral part of business Processes

 ERP software integrates all important processes across locations and
departments. ERP captures real-time and accurate data across the
organization. Provides a single source of accurate data with complete
transparency. Tracks the processes and provides insights and analysis
based on the trends, history. Enables making informed, timely decisions.
All this creates the groundwork required to roll out business processes
& implement business strategies in a company.
 With ERP, companies can define and implement business processes,
rules & guidelines, apply validations and checks, and set up notification
& alerts in case of any deviation from the defined workflow. Set up KPIs
for each process and monitor each function meticulously.

13
Business Process Improvements Using Enterprise
Resource Planning
Making the transition from traditional management of commercial processes
to enterprise resourcing planning software can be overwhelming for any
business. However, it is important to understand that the profitability and
growth of your business is dependent upon the quality of the processes that
support it.

 Human Capital Management

This process handles employees as assets and can be tricky to perform in the
absence of an ERP system. HCM is able to give workers a current value and
project their future value based on the investment the company makes in
them.

While there are separate HCM suites available, utilizing the HCM functions of
an ERP suite will maximize efficiency and minimize cost. HR departments will
be able to automate many of the time-consuming paperwork processes like
performance evaluations and payroll. ERP solutions will also allow HR staff to
manage benefits administration, compliance standards, documenting
personnel actions and employee records.

14
  Planning and Scheduling
Because ERP systems are designed to help manage and analyze data, they are
excellent for improving scheduling processes. ERP reports will allow
managers to see a breakdown of previous job data, as well as a history of
timetables broken up by department. This functionality gives project leaders
and department heads the ability to allocate appropriate manpower and
streamline future operations.

 Inventory Management
While most companies have an existing process for inventory management,
switching over to ERP software will allow for greater flexibility and enhanced
inventory management improvements. With certain forms of ERP systems,
companies are able to operate on a “just-in-time” schedule that keeps
inventory levels from getting too high or low.

 Integrated Customer Relationship Management

Customer Relationship Management software is a completely separate suite of
applications. While some CRM functions do overlap with ERP, both are
necessary for a thriving business. CRM focuses on improving customer
relations, while ERP focuses on streamlining business processes.

 Simplified Reporting
Reporting is a major part of every business. For companies without ERP,
report generation can be a tedious, cumbersome process that consumes a lot
of time and resources. Many businesses even have to build extra time into the
workday to allow employees to compile and submit a daily stack of reports.

ERP for forward thinking business

 Each business is unique in the way it performs and the products

it delivers. Now, this variety brings in the need of customized
business solutions that cater to the demands of customers and
clients. ERP seems to be the perfect solution that helps these
businesses work upon their means of success and achieve goals.

15
  Enterprise resource planning has been common to businesses
for more than a century now but it is the modern market that
demands primary focus onto using the best tools. ERP prepares
businesses to deal flexibly with challenging market situations and
without it, modern businesses would certainly fail.

A service provider that has a proven record to deliver autonomous and rapid change
in decision making and in an affordable cost is also the one that will be able to take
your business to expected heights.

The best ERP solutions include all of it – employee management, asset management,
financial management, project costing, procurement and raw material management,
inventory management, logistics, billing and every other factor that has a say in the
outcome.

It is your forward thinking and preparedness that can help your organization live
through the hard times and tough competition that present themselves every often.
ERP solutions have been advocated by both large and small organizations and
should be one of the first things to look out for when starting out with an idea.

Key Benefits of having an ERP

The benefits derived from ERP can far outweigh the costs of the system, providing that the system is selected carefully and is appropriate for your company from a feature, cost, and technology standpoint. Some of the benefits realized are:

16
The benefits derived from ERP can far outweigh the costs of the system,
providing that the system is selected carefully and is appropriate for your
company from a feature, cost, and technology standpoint. Some of the benefits
realized are:

a) A single integrated system

b) Streamlining processes and workflows
c) Reduce redundant data entry and processes
d) Establish uniform processes that are based on recognized best
business practices
e) Information sharing across departments
f) Improved access to information
g) Improved workflow and efficiency
h) Improved customer satisfaction based on improved on-time
delivery, increased quality, shortened delivery times

How ERP enables business strategy execution

1. Achieve Speed in Business
When a company desires to achieve speed in business to gain a competitive
advantage, ERP helps to keep a track of the time spent on activities such as –
time to production, time to procure, time to deliver. This provides insights for
areas of improvement to achieve speed. Introducing business discipline,
automating tasks, sending alerts notifications, managing by exceptions also
helps bring speed in business.

2. Increase Productivity & Efficiency

Almost every company aims to increase productivity & efficiency as part of
their business strategy. ERP enables implementing standard business
practices & company-wide policies. Digitizes, Streamlines & Automates
Processes. Automation of routine, monotonous activities turbocharges the
processes and improves productivity & efficiency.

17
3. Increase Customer Satisfaction
A crucial strategy to grow any business is to increase customer satisfaction.
The Customer Relationship Model (CRM) in ERP provides a holistic view of
the customer with all their specific needs & requirements and history of all
interactions with the customers over a period of time. You can analyze this
information to recognize your valued customers, know your customers better,
focus on continuously improving products and services based on their specific
requirements, provide personalized advice that will add value to them.

18
19