Supply Chain Management Function for Companies
Supply Chain Management (SCM) is a concept that has strategic and operational dimensions, which is related to controlling the flow of goods, information and services from initial suppliers to final consumers. The goal is to optimize these processes to achieve higher levels of efficiency, effectiveness and competitiveness in the supply chain.
SCM involves the coordination and integration of various business functions, including planning, procurement, production, distribution, logistics, and inventory management. This approach considers various aspects, such as market demand, changing trends, availability of raw materials, transportation, storage, as well as risk management and quality aspects.
By effectively managing the overall flow in the supply chain, companies can reduce costs, improve customer service, optimize inventory levels, minimize risks, and increase operational efficiency. In addition, SCM can also help companies identify opportunities for product and process innovation that can provide competitive advantages.
Role and Function of Supply Chain Management
Supply Chain Management (SCM) is to achieve efficiency, effectiveness and competitive advantage in managing the flow of goods, information and services in the supply chain. Some of the main functions of SCM include:
1. Operational Efficiency: SCM aims to reduce operational costs by eliminating waste, optimizing resource use, and increasing productivity. With better governance, companies can reduce costs in production, shipping and storage.
2. Improved Customer Service: SCM helps companies to understand and respond to customer needs better.
3. Inventory Optimization: Managing inventory effectively is an important goal in SCM.
4. Better Collaboration: SCM encourages better cooperation between various stakeholders in the supply chain, including suppliers, manufacturers, distributors and others.
5. Flexibility and Resilience: In the face of market changes, trends, or unexpected events, SCM helps companies to become more flexible and resilient.
6. Quality Improvement and Innovation: SCM can help in identifying opportunities to improve product quality and business processes.
7. Risk Management: SCM helps in identifying and managing risks that may arise in the supply chain, such as disruptions in the supply of raw materials, changes in regulations, or other issues.
Overall, the main function of SCM is to create value for companies and customers through efficient, collaborative and integrated management of the entire supply chain.
Also Read: The Role of SAP Business One in Manufacturing Company Quality Management
Supply Chain Management work process
Supply Chain Management (SCM) involves a series of processes that interact and support each other to manage the flow of goods, information, and services in a supply chain. Some of the main processes in SCM include:
1. Supply Chain Planning: This process includes demand forecasting, production planning, and setting inventory levels. The goal is to plan production and inventory accurately to meet customer demand.
2. Procurement: This process includes selecting, procuring and managing suppliers. This aims to ensure the supply of required raw materials and components is available in the right quantities and at the right time.
3. Production: This involves the physical production process or processing of the final product, which must be adjusted to market demand as well as existing inventory levels.
4. Inventory Management: This includes monitoring and controlling the inventory of finished goods or raw materials, to maintain a balance between adequate inventory to meet customer demand without causing excessive storage costs.
5. Distribution and Transportation (Distribution and Transportation): This involves delivering products from the point of production to the end customer, including route management, transportation methods, and warehouse management.
All these processes interact to achieve the main goal of SCM, namely creating value for the company and customers through efficient and integrated management of the entire supply chain.
Improving Supply Chain Management with an ERP System
Improving efficiency, visibility, and coordination in the supply chain can be achieved by using an Enterprise Resource Planning (ERP) System. ERP is an integrated software platform that combines various business processes, including inventory management, production, finance, and others, in one central system. Here are some ways to improve SCM with the help of ERP:
1. Business Process Integration: ERP enables direct integration between various business functions related to SCM, such as inventory planning, procurement, production, and distribution. This reduces information isolation and ensures better collaboration between departments.
2. Supply Chain Visibility: ERP provides real-time visibility across the supply chain, from suppliers to end customers. This helps in understanding demand, inventory, and production status more accurately, enabling more informed decision making.
3. Forecasting and Planning: ERP integrates planning modules that help in demand forecasting, production planning as well as inventory management. This enables more accurate production and delivery planning based on actual data and market trends.
4. More Efficient Inventory Management: ERP helps in optimizing inventory management by calculating optimal inventory based on demand, delivery time, and carrying costs. This helps prevent overstocking or shortages.
5. Order Management and Order Fulfillment: ERP enables automation and monitoring of the order process from start to finish, including monitoring order status, shipping arrangements, invoicing and more.
In an effort to improve SCM, companies can utilize ERP systems to integrate and manage various business functions in one central system. ERP helps increase visibility, optimize inventory, improve planning, facilitate collaboration, and enable more informed decision making in the supply chain.