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Supply
Chain Management
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| Supply chain management (SCM)
is emerging as one of the most powerful combinations of technologies
and business practices for companies worldwide. Companies that
have already streamlined their internal operations are now working
to realize further savings by improving the processes and information
exchanges that occur between trading partners. |
Market Trends
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Faster customer service, greater
product diversity, shorter product life cycles and globalization
have all dramatically increased the complexity of running a
business. Many companies are implementing enterprise resource
planning (ERP) solutions to attain more efficient intra-enterprise
transactions and a single data model. However, ERP systems alone
do not deliver what many companies need to survive and thrive
in today’s marketplace: a more efficient and responsive
supply chain.
Several important cross-industry trends are driving requirements
for better supply and demand planning, which in turn enables
strategies such as alternate sourcing, customer-responsive available-to-promise
delivery and mass customization. These trends include: |
• Power
shifting to consumers (and retailers): Consumers
continue to become more demanding because of the wealth of information
available to help them make educated and informed decisions.
The emergence of new channels, such as direct Web purchasing,
is shifting the balance of power more toward customers. Retailers,
as the chief agents of consumers, have also been gaining in
the balance of power with other supply chain participants. As
a result, supply chains are moving toward a more “pull”
orientation.
• Mass markets becoming custom
markets:The focus today is on creating value through
personalized and customized offerings targeted to individual
consumers rather than “one size fits all.”
• Physical
transactions changing to digital:
Increasingly, transactions such as purchase
orders that coordinate the flow of physical goods are being
processed electronically, with the goal of achieving full automation.
• Expanding
to global enterprises: Many companies today
are competing in saturated home markets. To meet growth objectives,
businesses are expanding into global markets, requiring the
ability to manage the manufacturing and distribution of products
not only locally and/or regionally, but also on a global basis.
• Rigid
supply chains becoming more flexible: Supply
chains have been very rigid and inefficient. To meet today’s
requirements, they are being streamlined and configured to be
more flexible.
• Stand-alone
planning becoming collaborative: To compete
effectively, companies are moving from a closed, internal planning
process to a collaborative effort between divisions as well
as with trading partners.
• Facing
relentless performance pressures: Companies
continue to focus on improving customer satisfaction; decreasing
overall cost structures; and developing and maintaining a competitive
advantage. |
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Customer Environment
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As a result of the trends
described on the previous page, the fundamental questions that
a business has to answer have become much more complex. Companies
are having difficulty making decisions around such basic questions
as: what to build; how much to build; where to store it; how
much to store in each location; and how to transport it.
Once these decisions are made, companies are then under enormous
pressure to be quicker, more efficient and more flexible in
their executions — which requires interenterprise linkages.
However, the inflexibility and limited function of most systems
makes establishing inter-enterprise linkages extremely costly,
using today’s approaches. The result is that very few inter-enterprise
execution processes have been automated.
Furthermore, the unprecedented rate and degree of change is
forcing companies to become more agile, responsive and efficient,
or be replaced by ones that are able to plan and execute in
this new environemnt. For example, the market trend to mass
customization has created a ballooning of product options that
a company must offer in order to meet the wants and needs of
its customers.What’s more, the life cycle for products
has shortened, increasing the importance of decisions around
new product launches and the discontinuance of some products.
Globalization also increases the difficulty of making decisions.
Processing material and information in modern, global enterprises
is very different from the traditional, vertically integrated
businesses. Global companies of all sizes must transcend geographical,
functional and enterprise boundaries to include suppliers and
customers. For instance, a business must be able to optimize
across geographies, plants, shipping costs, labor, tariffs and
more to determine which plant should fulfill a customer order.
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