Enterprise e-Business System....Contd

Section III: Supply Chain Management:  The Business Network

INTRODUCTION

Fundamentally, supply chain management helps a company get the right products to the right place at the right time, in the proper quantity and at an acceptable cost.  The goal of SCM is to efficiently manage this process by forecasting demand; controlling inventory; enhancing the network of business relationships a company has with customers, suppliers, distributors, and others; and receiving feedback on the status of every link in the supply chain.  To achieve this goal, many companies today are turning to Internet technologies to Web-enable their supply chain processes, decision-making, and information flows.

WHAT IS SCM?

Supply chain management is a cross-functional interenterprise system that uses information technology to help support and manage the links between some of a company’s key business processes and those of its suppliers, customers, and business partners.  The goal of SCM is to create a fast, efficient, and low-cost network of business relationships, or supply chain, to get a company’s products from concept to market.

According to the Advanced Management Council, supply chain management has three business objectives:

·         Get the right product to the right place at the least cost.

·         Keep inventory as low as possible and still offers superior customer service.

·         Reduce cycle times.  Supply chain management seeks to simplify and accelerate operations that deal with how customer orders are processed through the system and ultimately filled, as well as how raw materials are acquired and delivered for manufacturing processes.

Electronic Data Interchange:

Electronic data interchange (EDI) involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners (organizations and their customers and suppliers).  Data representing a variety of business transaction documents are electronically exchanged between computers using standard document message formats.  Characteristics of EDI software include:

·         EDI software is used to convert a company’s own document formats into standardized EDI formats as specified by various industry and international protocols.

·         Formatted transaction data are transmitted over network links directly between computers, without paper documents or human intervention.

·         Besides direct network links between the computers of trading partners, third-party services are widely used. 

·         EDI eliminates the printing, mailing, checking, and handling by employees of numerous multiple-copy forms of business documents.

Benefits of the business use of EDI include:

·         Reduction in paper, postage, and labor costs

·         Faster flow of transactions as formatted transaction data are transmitted over network links directly between computers, without paper documents or human intervention.

·         Reductions in errors

·         Increases in productivity

·         Support of just-in-time (JIT) inventory policies

·         Reductions in inventory levels

·         Value-added network companies offer a variety of EDI services.  They can offer secure, lower cost EDI services over the Internet.

·         Smaller businesses can now afford the costs of EDI services.

THE ROLE OF SCM

SCM supports the objectives of the top three management levels of an organization (strategic, tactical, and operational).  The role of information technology in SCM is to support these objectives with inter-enterprise information systems that produce many of the outcomes a business needs to effectively manage its supply chain.

BENEFITS AND CHALLENGES OF SCM

Major business benefits that are possible with effective supply chain management systems include:

·         Faster, more accurate order processing, reductions in inventory levels, quicker time to market, lower transaction and materials costs, and strategic relationships with suppliers.

·         Companies can achieve agility and responsiveness in meeting the demands of their customers and the needs of their business partners.

Major business challenges include:

·         Lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM failure.

·         Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and other business problems, no matter how efficient the rest of the supply chain management process is constructed.

·         Inaccurate production, inventory, and other business data provided by a company’s other information systems are frequent causes of SCM problems.

·         Lack of adequate collaboration among marketing, production, and inventory management departments within a company, and with suppliers, distributors, and others.

·         SCM software tools are considered to be immature, incomplete, and hard to implement by many companies who are installing SCM systems.

TRENDS IN SCM

Three possible stages in a company’s implementation of SCM systems. 

·         First stage – a company concentrates on making improvements to its internal supply chain process and its external processes and relationships with suppliers and customers.

·         Second stage – a company accomplishes substantial supply chain management applications by using selected SCM software programs internally, as well as externally via intranet and extranet links among suppliers, distributors, customers, and other trading partners.

·         Third stage – company begins to develop and implement cutting-edge collaborative supply chain management applications using advance SCM software, full-service extranets links, and private and public e-commerce exchanges.