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7 min read

What is Supply Chain Management (SCM)?

What is Supply Chain Management (SCM)?

Supply Chain Management (SCM) is the management of the movement of products and services and includes all of the processes within your business that transform raw materials into final products. In software terms, it provides a view on how all aspects of your supply chain are working together.

SCM is critical because it gives you visibility into all of the links in your supply chain. With the ability to see how all links in the supply chain are performing, you can remove bottlenecks.  This is the primary goal of an effective SCM strategy – to actively streamline your business’ supply-side activities. By streamlining these activities and eliminating bottlenecks, you increase customer satisfaction and your competitive advantage by ensuring a product or service is there when it’s needed or desired.

 

Interested in finding an SCM solution that will integrate and automate your entire quote-to-cash cycle?

Check out our article, Using Acumatica to Streamline SCM Processes, or contact our team if you have any questions!

 

What is a Supply Chain?

A supply chain is when a person or a company participates in the exchange or delivery of goods. This includes anything from buying your groceries to receiving the raw materials to make computer parts. As long as products, money, or materials exchange hands, you are part of a supply chain.

A supply chain includes but isn’t limited to:

  • Delivered products.
  • Relationship management.
  • Obtaining raw materials.
  • Product development.
  • Warehouse management.
  • Managing supplier relationships.
  • Maintaining the flow of goods.
  • Logistics management.

SCM oversees each touchpoint of a company’s product or service, from start to finish. An SCM can help you with both local and global supply chains. It also provides a supply chain system with clear and well-understood supply chain activities. By managing the supply chain, companies can cut excess costs and deliver the products to the consumer faster.

 

Are you looking for an SCM solution that will support your growth and keep your customers satisfied?

Learn more about Acumatica’s comprehensive supply chain management solution.

 

History of Supply Chain Management

The term “Supply Chain Management” was first used in 1982 by Keith Oliver during an interview:

Supply chain management (SCM) is the process of planning, implementing and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.

— Keith Oliver

However, he wasn’t the father of the concept. The concept for SCM came into existence during the early twentieth century as part of the industrial revolution. By using assembly lines to speed up production, businesses accelerated the process of purchasing, manufacturing and delivering products. This newfound efficiency helped companies increase their profit significantly. The first supply chains would have been simple and straightforward. With only one or two people managing the coming and going of goods. The rest of the team would be devoted to manufacturing.

Today, supply chains have gotten large enough to span the globe. This means that they can no longer be managed comfortably by a small group of people. With the increased need to keep track of an entire supply chain, SCM software was developed.

SCM software was first introduced as part of enterprise resource planning (ERP) systems during the early 1990s. The term SCM gained popularity in 1999. After the publication of the book Introduction to Supply Chain Management by Robert Handfield and Ernest Nichols. Even though SCM is part of another solution (ERP), it serves a vital role in keeping a business running. Businesses run on inventory, product availability, delivery and margins. These are all things that SCM controls as part of its base functionality.

 

Goals of Supply Chain Management Software

A well-managed supply chain will give your company the competitive advantage it needs to succeed. The improvements in productivity and efficiency that come from an effective SCM go straight to the bottom line of a company and have a real and lasting impact.

An SCM can help you and your business:

  • Reduce costs.
  • Increase in efficiency.
  • Improve customer satisfaction.

When done successfully, these three business benefits combine to help your operation be as successful as possible.

 

Who Participates in Your Internal Supply Chain?

SCM involves several departments throughout your company, working together to ensure efficiency. These departments include:

 

Purchasing

  • The role of purchasing in supply chain management is more than buying raw materials from suppliers. The purchasing department is responsible for creating and enforcing standards of quality with suppliers. They also negotiate prices, control inventory and establish protocols around the disposal of waste. Once your organization has possession of the goods, purchasing’s role is complete.

 

Finance and Accounting

  • Finance is critical in the overall management of the supply chain. The department determines the budget for operations. They are the ones who control the flow of money to all parts of the business. Finance works in tandem with the accounting department. While finance decides who gets what funds, accounting is responsible for record-keeping and reporting functions. The two teams work together to fill a variety of roles in the company. They also manage and invoice accounts receivable.

 

Human Resources (HR)

  • The human resources department is responsible for all aspects of the business that deal with personnel. This includes the process of hiring, firing and evaluating employees. The HR department also creates schedules and makes changes when necessary. Employees in this department understand the supply chain to select the right candidates for each role.

 

Transportation and Logistics

  • When it comes to logistics and the supply chain, there are two types: inbound and outbound.
    • Inbound logistics includes the plan and details to get raw materials to your organization for production.
    • Outbound is how you then deliver those finished products to your customers.
  • Transportation is the main component of those functions. Sometimes, raw materials will come from overseas in a container on a large ship. Other times, it could come from the grocer down the street via hand-truck. The same is true for your finished products. They could ship via air freight across the country or on a truck across town. The logistics or transportation manager coordinates the movements of both inbound and outbound goods — no matter where they are going or how they move them.

 

Warehouse Operations

  • This department has perhaps the most prominent role in supply chain management. Team members within the warehouse are responsible for receiving raw materials as well as maintaining an inventory of goods and manufactured products. They also put finished products on the dock for shipment. Warehouse operations managers keep in mind the best ways to keep operations efficient.
  • For example:
    • How can you cycle machines that are on the warehouse floor for highest efficiency?
    • Should items be stocked according to how often they are used?
    • Should it be in proximity to other materials used in assemblies?
    • What triggers a reorder of needed supplies?

 

Product Planning

  • In an ideal world, product planning starts as a response to a market need. There are times though that a product must be created before the market knows it needs it. When a new product is decided upon, the product team completes a feasibility audit. This includes what the market will pay for the finished product and how much it would cost to produce it. This information should come from all levels of the supply chain.
  • When deciding on a new product, it is essential to keep in mind the total cost of producing the product. If the cost to produce and ship is higher than the profit you make, then a different product would be better. Effective supply chain management software can mitigate costs by obtaining raw materials more inexpensively, which makes a product idea possible.

 

Manufacturing

  • The effectiveness of your supply chain will be most visible during the manufacturing process.
    • Does your team have all the inventory they need to keep up with demand?
    • Are they operating efficiently, and utilizing human resources?
    • Are they producing the right amount of stock to meet customer needs?
    • Is your team being aware of safety as they work?
  • If there were any missteps in the supply chain, they would show up here, usually as scheduling or resource delays to your manufacturing process.

 

Customer Service

  • The impact customer service can have on supply chain management cannot be understated. Customer service professionals have their ear to the ground. They operate as your front line when it comes to how satisfied your customers are. They can help you anticipate challenges like large orders and new customers, as well as mitigate customer disappointments due to delayed shipments or order errors.

 

Critical Elements of a Modern SCM

The key elements of SCM can be wide-ranging and varied. Here are a few:

 

 

Enterprise Resource Planning (ERP) Solutions

The purpose of an ERP is to manage all transactions in a business. This includes but isn’t limited too:

  • Shipping orders.
  • Receiving inventory.
  • Creating bills of lading and packing slips.
  • Tracking.
  • Allocating transport costs.

An ERP can even obtain the best-cost transport solution quote online via integration with package/freight companies. A correctly implemented ERP is crucial to providing excellent SCM to any mid-size or larger business.

Are you looking for an ERP software solution in Calgary or Vancouver?

Get in touch with the Aqurus team to talk more about Acumatica.

 

 

Electronic Data Interchange (EDI)

EDI facilitates the integration of external systems by providing a safe, secure way to exchange data and payment information between companies.

For example, a shipping manager may need multiple quotes before shipping a large delivery to find the best price. They can use the company ERP system to ‘find the best quote for order #12345’. Once this command has been given to the system, an EDI transfer is initiated. This goes to a central network to download shipping costs, based on the details of the shipping order. Once the best quote is selected, the shipping manager can then approve the quote, book the delivery — all in one easy transaction. No duplicate data entry, no errors introduced. Just quick, easy and convenient.

 

 

Transportation Management System (TMS)

A TMS can be in the form of either a standalone application or a module within an ERP system; either way, it is crucial for busy distribution centres. A TMS can take over many of the essential functions of the shipping department including:

  • Tracking of all types.
  • Shipments.
  • Load breakdowns.
  • Generating manifests.
  • Customs paperwork.

A TMS provides a focused level of shipping functionality that many ERPs lack. Designed to work with the internal systems of major carriers, a TMS can automatically provide updates and transport management.

 

 

Warehouse Management System (WMS)

A WMS manages all operations of a warehouse, including SCM supporting ones such as:

  • Order picking.
  • Packing.
  • Barcode labelling and reading.
  • Tracking in-transit inventory.
  • Mobile (truck-based) stock.
  • Returns and inventory updating.

Available as stand-alone or as a module within an ERP, a WMS is crucial for warehouse operations. Using a WMS will help your company provide your product or service in the most cost-effective way.

 

 

The Future of SCM

The future of SCM is dependent upon access to and sharing of information. This applies to information about shipments, costs, regulations and environmental factors that impact delivery. By having this information on hand, your business will be able to handle and predict future problems. An SCM is an effective way of organizing and accessing all of the information that is important to modern businesses.

To take advantage of technology and information, an SCM system must:

  • Be accessible everywhere.
  • Have access to all inventory and account data.
  • Have the ability to update information based upon data obtained from carriers.
  • Have the security to act as a custodian for confidential data.
  • Grow with your company and support additional functionality as it becomes necessary.
  • Provide support for custom elements to provide functionality that is needed by your company.

 

Why Have an SCM?

There are a lot of factors that come together to signal that it might be time to invest in an SCM. It could be that your inventory is poorly managed or shipments are being sent to the wrong addresses. Whatever the final straw is, there are some definite benefits to having one in place.

Benefits of SCM:

  • Increased revenue/ decreased costs.
  • A balanced inventory.
  • The ability to forecast inventory and purchase patterns in your business.
  • Increased security.
  • Comfortably run multiple locations.
  • Purchases supplies from multiple vendors without doubling up orders.
  • Compliance with government regulations.

 

Supply Chain Management is a crucial aspect of every business. If your supply chain is poorly managed, there is a chance that you are missing out on opportunities.

Acumatica provides accurate and timely information, as well as the functionality needed to resolve issues and update management and customers readily. Their modern distribution business software provides true, company-wide inventory data that lets you create proactive, responsive replenishment operations and minimize inventory costs.

Depending on your business’ supply chain processes, you may need additional Acumatica cloud ERP software such as Advanced CRM, Commerce Integration, or Business Intelligence. The good news is that you don’t have to figure this out on your own. We are a gold-certified Acumatica implementation partner. Our team are experts in figuring out what cloud ERP software you need and we’re readily available to answer your questions!

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