Supply Chain Management Systems

Supply Chain Management Systems

• Supply chain is a network of services, material, and information flow linking a firm's customer relations, order fulfillment, and supplier relations processes to those of suppliers and customers.
• Supply chain management (SCM) coordinates a business' entire production flow, from sourcing raw materials to delivering a finished item.
• Michael Porter's concept of a business value chain describes a series of processes within a company to add value to a product or service to gain a competitive advantage in the market.
• Companies need to align their competitive strategy and supply chain strategy.
• Porter's Value Chain divides company activities into two categories:
  • Primary Activities: directly involved in creating and delivering products or services
    • Inbound Logistics: receiving and storing raw materials
    • Operations: transforming inputs into final products
    • Outbound Logistics: distributing finished products to customers
    • Marketing and Sales: promoting and selling products
    • Service: providing post-sale support
  • Support Activities: assist primary activities
    • Procurement: acquiring resources
    • Technolofgy Development: research and development (innovation)
    • Human Resource Management: recruiting, training, employee management
    • Firm Infrastructure: organizational structure, management, administrative systems

Significance of SCM

• Corporations focus on their core competencies and reduce ownership of raw materials and distribution channels.
• All functions of a company's supply chain contribute to its success or failure.
• A company's supply chain capabilities need to support the ability to satisfy targeted customer segments.

Effective SCM

• The global supply chain is a network of suppliers, manufacturers, distributors, retailers, wholesalers, and customers.
• Effective SCM optimizes the network to ensure everything gets where it needs to be, when it needs to be there, smoothly.
• SCM includes obtaining components, manufacturing the product, storing it, and delivering it to customers.
• Effective supply chain management minimizes costs, waste, and time in the production cycle and impacts profitability.
• Effective supply chain management gives businesses a competitive advantage.

SCM & ERP

• ERP (Enterprise Resource Planning) provides integrated transaction processing to increase information consistency and efficiency.
• SCM focuses on providing a higher level of business planning and decision support functionality for effective coordination and execution of inter-organizational business processes.
• Modern technologies have revolutionized business and SCM and ERP are no exception.

The Role of ERP in SCM

• The role of ERP in SCM involves real-time data integration, demand forecasting, inventory management, supplier relationship management, delivery & customer service, maintenance & monitoring, order processing, warehouse management, transportation management, and data analytics & reporting for a cohesive approach in the SCM process.

SCM Integration

• Companies strive for greater supply chain coordination and collaboration.
• Information integration shares information among supply chain members.
• Planning synchronization involves joint design and execution of plans for new products, forecasting, and replenishment.
• Workflow coordination streamlines and automates supply chain partner workflow activities.

SCM Integration Dimensions

• Information Integration: Elements include sharing information and transparency, direct and real-time accessibility; Benefits include reduced bullwhip effect, early problem detection, faster response, and trust building.
• Synchronized Planning: Elements include collaborative planning, forecasting and replenishment, and joint design; Benefits include reduced bullwhip effect, lower cost, optimized capacity utilization, and improved service.

Classification of Supply Chains

• Upstream Supply Chain: refers to activities closer to the raw material source or the beginning of the supply chain. In an upstream flow, a company looks towards its suppliers or the origins of the raw materials to produce goods.
• Downstream Supply Chain: refers to activities moving towards the end customer, or the end of the supply chain. In the downstream flow, a company focuses on distributing products to customers, including wholesalers, retailers, and ultimately end consumers.

SCM System Components

• Components of SCM systems include Supply Planning, Sourcing/Procuring Raw Materials, Manufacturing, Delivery and Logistics, Processing Returns, Reverse Material Flow, Recycled/Returned Products and Components, and Cash Flow.

What is a Bullwhip Effect in SCM?

• A bullwhip effect is a phenomenon in supply chain management where small fluctuations in demand at the consumer level cause increasingly larger fluctuations in demand as you move up the supply chain.
• This effect leads to inefficiencies like excessive inventory, stockouts, longer lead times, and increased costs.

Causes of the Bullwhip Effect

• Inaccurate forecasting
• Order batching
• Price fluctuations
• Lack of communication between supply chain participants

How to Avoid the Bullwhip Effect

• Improve demand forecasting using data analytics, machine learning, and real-time insights.
• Enhance communications by sharing demand information among supply chain participants.
• Reduce order batching by using smaller, more frequent orders instead of larger ones.
• Stabilize the price by avoiding frequent changes or promotions in prices.

Push-Versus Pull-Based Supply Chain Models

• In a push-based model, inventory is produced based on forecasts.
• In a pull-based model, production follows customer orders.

A Comprehensive Integrated View

• A comprehensive integrated view involves supplier databases/apps, machine learning and deep learning, data collection from sensors and mobile apps, data storage, and analytics for improved efficiency.

Business value of SCM systems

• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
• Reduce supply chain costs
• Increase profitability
• Increase sales

Explore the fundamental concepts of Supply Chain Management, focusing on how businesses coordinate their production flows from raw material sourcing to product delivery. This quiz delves into Michael Porter's Value Chain framework and the importance of aligning competitive and supply chain strategies.