Nexcore 
                  
EMAILHOME 
         articles
   b2b integration
   e-scm

using encryption for
internet security

processes and
components of scm

e-commerce solutions
built to order

enterprise application
integration
 
 
Introduction
Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved.


To comprehend the term "Supply Chain Management" we must first understand as to what is a supply chain. A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. SCM is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed).

SCM Flows
Supply chain management flows can be divided into three main flows:
  • The product flow
  • The information flow
  • The finances flow
  • The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.

    Software & Technology
    Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer procurement marketplaces where manufacturers can trade and even make auction bids with suppliers.

    There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

    Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies. By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's clients), SCM applications have the potential to improve the time-to-market of products, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future needs.

    SCM applications are developed using a number of scalable enterprise-level technologies like Electronic Data Interchange (EDI), Extensible Markup Language (XML) and other server application tools.

    Processes
    Supply Chain Management involves many processes and procedures for efficient chain management. A few of the processes of Supply Chain Management are:

    Procurement: E-Procurement is the business-to-business purchase and sale of supplies and services over the Internet. An important part of many B2B initiatives, e-procurement web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify prices or invite bids. Transactions can be initiated and completed. Ongoing purchases may qualify customers for volume discounts or special offers.

    Outsourcing: Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business.

    E-Fulfillment: It optimizes customer response by merging several important functions: order management, storage and delivery of finished goods. Warehouse execution may involve final assembly and packaging of products. Besides better customer response, benefits include more efficient inventory management, order entry, warehousing and transportation management and an optimizing end-to-end order-fulfillment process.

    E-Tailing: E-tailing is the virtual storefront. As a place for direct retail shopping, with its 24-hour availability, global reach, ability to interact and provide custom information and ordering, and multimedia prospects, the Web is rapidly becoming a multibillion-dollar source of revenue for the world's businesses.

    Forecasting: Seeks to predict levels of weekly or monthly product activity over a time horizon, typically two years. The statistical methods proven to make such predictions have been used by manufacturers and distributors since the advent of MRP II systems. Besides increased availability, the nature of forecasting also is changing. Forecasting systems are used to increase agility. Companies are able to consolidate demands from multiple business units, reduce forecasting cycle times from weeks to days, while simultaneously increasing forecasting accuracy, eliminating excess inventory, and ensuring that material is on-hand for scheduled production.

    Warehousing: Integrates work performed within warehouses and distribution centers with a transactional-type information system. Simple storage and retrieval of materials is superseded by strategies to increase throughput and productivity by managing the full range of warehouse resources to effectively manage warehouse business processes and direct warehouse activities, including receiving, put away, picking, shipping, and inventory cycle counts. Most support radio-frequency communications, allowing real-time data transfer between the system and warehouse personnel.

    Logistics: Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers' requirements.

    Conclusion & The Future of Supply Chain Management
    Supply chain management is poised for a rapid evolution. Over the next few months, the rush to meet the demands of individual customers is expected to speed up. Increasing supply chain collaboration will take place at large enterprises and small- and medium-sized enterprises (SMEs), both of which are increasing their supply chain investments and pursuing e-business initiatives.

    Increasingly, more brick-and-mortar manufacturers are adding e-commerce capabilities and, as a result, are facing new challenges, such as individual delivery of products.

    The biggest challenge ahead may be to overcome the notion that a single organization can achieve best-in-class supply chain management. The truth is that organizations must work together to help each other succeed. Everyone in the supply chain is a strategic link. Strong links make strong supply chains; weak links hurt everybody - from the raw material producer to the end customer, who evaluates how well a supply chain is performing every time he or she makes a purchase.