Supply Chain Management
The current era is termed to be the era of supply. Before I start with my persuasion on this dynamic field of Supply Chain Management, let us concisely take a feel of what a basic supply management marks it ground on.
Not very far ago, even a perfect business strategy would start off being more concerned about production and finally about the sales. Logistics were not conceived of as much importance as they deserved to be. It is difficult, to imagine the business model of any entity without talking about the supply chain mechanism in this modern digital economy.
An effective supply chain management delivers a solution to the following problems:-
1) Distribution network Configuration
This deals more or less with the number of items , location of products- both the source and the management and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
2) Distribution Strategy
The distribution strategy is concerned with the questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL).
3} Trade-Offs in Logistical Activities
The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.
4} Information
Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.
5} Inventory Management:
Quantity and location of inventory, including raw materials, work-in- progress (WIP) and finished goods can be effectively overcome through a proper supply chain management.
6} Cash-Flow
Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain. The way the supply chain is designed has significant implications on companies' working capital, and can have important consequences especially for leveraged and distressed companies.
I believe that by now I have created a location of the field of supply chain management in the minds of the people. Let us now combine all the aspects above and form a definition, for the term “supply chain management”.
“The term supply chain management means a network existent that follows a particular strategy to perform logistical activity and coordinates the movement of material information and funds across the supply chain”
Use of Information Technology in smoothening the supply chain management.
There are a numerous vital factors that play an important role in successfully managing the supply chains in today's highly dynamic environment. Some of these that cannot be ignored are:
• paying utmost attention to the needs and desires of the end customer
• designing flexibility into the supply chain for rapid response to changing conditions
• utilizing the latest communication and logistics technologies
• employing a sound measurement system for making the right decisions
• always communicating through the total supply chain.
The one that can be termed as most critical are distribution network configurations, inventory control system, product design, information technology, supply chain integration and strategic partnering.
As we move on in the 21st century, like all other functions supply chain management is in a state of metamorphic flux. Supply Chain Management is witnessing the incoming of several new and latest technologies that are enhancing the whole mechanism and creating a more efficient business model.
Let us take a look of some of the latest technologies that are creeping into Supply Change Management and are reshaping its crucial business functions:-
1} Information Technology
The management of the supply chain has been revolutionized because of Internet as well as the intranet (connecting the workstations within an organization) and extranet (electronic network among business partners, e.g., EDI). Due to the power and flexibility being inculcated by these strong networks, helps the business to have a more control over the flow of products, services and funds than ever before. Dramatic results have been obtained from using information to improve supply chain performance.
The Web has created a rare opportunity for organizations to access global markets. It allows for mass customization, stronger business relationships, a greater degree of channel coordination, and enhanced communications with customers and business partners. Information technology can further be segregated into few areas of operation like:
• E-Commerce:-
Electronic Commerce is the paperless exchange of business information using Electronic Data Interchange (EDI) and related technologies. If you are familiar with Electronic Mail (E-Mail), computer bulletin boards, facsimile machines (faxes), Electronic Funds Transfer (EFT) You can very well understand what is e-commerce. These are all forms of EC. All EC systems replace all or key parts of paper-based work flow with faster, cheaper, more efficient, and more reliable communications between machines. In today's Defense Department procurement arena, however the most important EC technology to know about is Electronic Data Interchange, or EDI.
Electronic commerce has revolutionized how business is conducted in today's world. It is now a reality in both business-to-customer and business-to-business transactions and is rapidly accelerating in both areas.
• Internet based procurement:-
Information technology (IT) has long been applied to support the exchange of goods, services and information between organizations. Early on, when interorganizational information systems (IOIS) like EDI systems were introduced, electronic markets emerged for business purchasing. However, it is only with the advent of Internet-based e-procurement systems and business-to-business (B2B) electronic markets that the real opportunities for any-to-any (A2A) online transactions have opened up across space and over time. The extensive connectivity offered by online trading networks creates value by lowering communication and search costs. But this benefit is just one aspect of what is desired by adopting firms. The other aspect is that purchasing firms expect to maintain established long-term relationships with preferred suppliers.
Webs are about to gain popularity with increase in business-to-business sales. Nowadays companies globally are showing more concern about Internet-based procurement (IBP) because of the high return on a relatively modest investment and of course with a minimal risk. We can categorize the Internet based procurement as follows:-
Direct-Material Procurement, which involves the acquisition of products directly required for production. These include the components and materials from key upstream supply chain partners.
Indirect-Material Procurement, which is the purchase of products that are indirectly used in the production process. They include office supplies; maintenance, repair and operating supplies (MRO).
2} Outsourcing of Logistics:
Outsourcing, as we all know, 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. 'Logistics' is defined by the Council of Logistics Management as "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. Traditionally, logistics activities were handled internally, particularly in medium to large size corporations. In the United States, third party logistics services have gained momentum over the past decade.
3} Business Process Reengineering
Business process reengineering (BPR) efforts can be termed as restructuring of an existent process to eliminate waste, improve quality, increase service level and enhance customer satisfaction. Most BPR efforts are confined to one company; however, BPR across multiple members of the supply chain should become increasingly common. By thinking in terms of supply chains instead of individual operations or functions, companies can improve their competitive strategies. Advances in information and communication technologies have made it possible to have real-time connectivity among supply chain partners.
4} Automatic Identification Technique
Automatic identification, or auto ID for short, is a term given to a host of technologies that are used to help machines identify objects. Auto identification and automatic data capture are often coupled with each other. That is, companies want to identify items, capture information about them and somehow get the data into a computer without having employees type it in.
Automatic Identification Technique systems are ought to be functional with following aims and purposes:-
• Increase efficiency
• Reduce data entry errors
• Free up staff to perform more value-added functions, such as providing customer service.
Some of the technologies that fall under the umbrella of automatic identification technique are: - bar codes, smart cards, voice recognition, some biometric technologies (retinal scans, for instance), optical character recognition, and radio frequency identification (RFID).
RFID- Radio Frequency Identification (RFID) is a means by which we can identify a person or object using the transmission of radio frequencies, typically 125 kHz, 13.56 MHz or 800-900MHz. There are several methods existent for the same, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder or an RFID tag). The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to computers that can make use of it.
5} E-Procurement
E-Procurement also called as supplier exchange in a very gentlest manner can be termed as platform for business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies, work and services. The mode used for the same can be internet as well as other information and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning (ERP). Typically, 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.
E-procurement software may make it possible to automate some buying and selling. Companies participating expect to be able to control parts inventories more effectively, reduce purchasing agent overhead, and improve manufacturing cycles. E-procurement is expected to be integrated with the trend toward computerized supply chain management.
Conclusion:-
To conclude I would say that in the current scenario, it is not possible to continue with the historical methodologies of supply chain management and therefore this utmost vital segment of an organization cannot be dreamt of anymore without the IT enabled systems.
I hereby bring my paper to terminus with this popular quote:-
“The best supply chains aren't just fast and cost-effective. They are also agile and adaptable, and they ensure that all their companies' interests stay aligned”
Hau L. Lee, US Professor of Operations, Information and Technology in Harvard Business Review, Oct. 2004
References: - 1} Principles of Supply Chain Management, Joel Wisner
2} Fundamentals of Supply Chain Management, Kenneth B. Ackerman
3} Self Research in consultation with college faculty
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