SUPPLY CHAIN MANAGEMENT SOFTWARE
First let us understand what is meant by supply chain management. ERP package provides us control over materials and processes in our plants and offices. We, however, need to go beyond this. We should get control over the whole chain from raw material and component supplies to our plants and the retail stores. This is implemented through special software.
Simplistically speaking, Supply Chain Management (SCM) is a method of creating products for the end user. It cuts across the suppliers of raw materials (vendors), the manufacturing unit, the warehouses, the transporters, the distributors the retailers and the final sale.
Market demand triggers off the supply chain. SCM could be defined as the delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing through consumption.
The data from the vendors, the big distributors and retailers is constantly fed into the system enabling an appropriate response on the part of the marketing managers and production managers. SCMS makes us understand the demand pattern and we can align the product mix accordingly.
Out of 300 Indian companies which have installed ERP, most of them are thinking of installing SCMS also. The median price of software is almost $250,000.
Formerly, companies were integrated internally and externally by traditional devices like phone-lines, for machines, VSATS. This integration which was mostly manual will now be software-based.
In SCM, the data is generated and analyzed at several points on the chain. It takes into account any constraints which might affect the supply chain and incorporates this data for future forecasts. SCM rationalizes vendors, and reduces their numbers.
Implementing SCM is not easy. Internal supply chains are integrated first. It calls for training personnel to log in data accurately and analyze the output. The success depends on the
data input. There is often resistance to SCMS from the middle management. SCMS is revenue enhancer, makes a company learn by improved asset utilization, and decrease costs by removing inefficiencies.
A big company like Lever has to integrate its head office in Mumbai and 50 factories, 50 depots and 200 sites. It, therefore, needs a seamless supply chain software package. It last year launched and re-launched close to 70 products.
SCM will enable it to monitor all its production lines, keeping in mind these launches. It will also enable to rearrange its distribution set-up to make way for a new product. The original supply chain of Lever consisted of suppliers to manufacturing centers to storage points to distributors to retailers to consumers. There was blockage of working capital in inventories to the extent of 20-25 percent of turnover in 1995.
After computerizing the supply chain, with more precise demand forecasting and daily stock replenishment inventory came down to 5-6 percent of turnover. High volume products are directly distributed, and buffer is created for lower volume brands.