What is supply chain management?

Supply chain management (SCM) is the combination of art and

science that goes into improving the way your company finds the
raw components it needs to make a product or service and deliver it
to customers. The following are five basic components of SCM.
1. PlanThis is the strategic portion of SCM. Companies need a
strategy for managing all the resources that go toward meeting
customer demand for their product or service. A big piece of SCM
planning is developing a set of metrics to monitor the supply chain
so that it is efficient, costs less and delivers high quality and value to
customers.
2. SourceNext, companies must choose suppliers to deliver the
goods and services they need to create their product. Therefore,
supply chain managers must develop a set of pricing, delivery and
payment processes with suppliers and create metrics for monitoring
and improving the relationships. And then, SCM managers can put
together processes for managing their goods and services inventory,
including receiving and verifying shipments, transferring them to
the manufacturing facilities and authorizing supplier payments.
3. MakeThis is the manufacturing step. Supply chain managers
schedule the activities necessary for production, testing, packaging
and preparation for delivery. This is the most metric-intensive
portion of the supply chainone where companies are able to
measure quality levels, production output and worker productivity.
4. DeliverThis is the part that many SCM insiders refer to as
logistics, where companies coordinate the receipt of orders from
customers, develop a network of warehouses, pick carriers to get
products to customers and set up an invoicing system to receive
payments.
5. ReturnThis can be a problematic part of the supply chain for
many companies. Supply chain planners have to create a responsive
and flexible network for receiving defective and excess products
back from their customers and supporting customers who have
problems with delivered products..















What does supply chain integration mean?
Integration of Supply Chain Management
When eBusiness is integrated with ERP, the whole extended
system provides a vision of business processes that span
multiple businesses and enterprises. In the most ideal case
companies should be able to connect disparate platforms,
applications and data formats across the value chain, including
not only suppliers but customers as well. Furthermore,
companies should retain the flexibility to change and add
functions to applications as business needs evolve. Companies
need to be able to adapt their ERP systems to the emerging
world of eBusiness.
The major partners of the supply chain are the suppliers, the
organization and the consumers and any other partners involved
in the business transactions (like banks, middlemen, etc.).
Supply chain refers t the complex network of relationships that
organizations maintain with trading partners to procure
manufacture and deliver products or services. Supply chain
encompasses the facilities where raw materials, intermediate
products and finished goods are acquired, transformed, stored
and sold.
These facilities are connected by transportation links along
which materials and products flow. Supply chain consists of
many companies, individuals and institutions. Supply chain
management is the coordination of material, information and
financial flows between and among all the participants
Establishing an integrated supply chain requires the total
commitment of upper management. The heart of an effective
supply chain is the purchasing department that initiates all
ordering documents. As such, the manager of the purchasing
function or the company officer to whom purchasing reports is
the final authority on supply chain management decisions.
Supply chain integration requires a team consisting of sales,
engineering, logistics and purchasing. Representatives of any
other departments in the companys structure that have
operational interest in the supply chain should also be included.
Sales participate to verify a customers needs. Engineering
confirms that a product conforming to the customers
specifications can be delivered. Logistics voices any concerns
pertaining to scheduling. Purchasing determines sourcing. An
integrated supply chain necessitates excellent communication
between the buyer and seller. The relationship and
communication that exists between the ordering and shipping
points (buyer and seller) should be strong enough to insure that
the product being ordered is available for shipment. To
maximize the effectiveness of the supply chain, the relationship
and communication that exists between the ordering and
shipping points should be strong enough to insure that items
being ordered are available for shipment. To maximize the
effectiveness of the supply chain, the two companies computer
infrastructure need to be linked. The sellers computer system
should allow the buyers system to track the status of an order
from the time the purchase order is issued. As the order is
processed by the seller, updates are provided to the buyer. When
product is ready for shipment and loaded onto a truck, the
transportation department or transport agency should have the
capacity to keep both seller and buyer apprised of the shipments
status. It is imperative that every company specifically define
the functional responsibility of all departments within each of
their organizations. This eliminates any doubt as to which
department has responsibility for addressing any issues that
arise. Supply chain integration calls for every organization and
individual involved in the process to understand that they can all
benefit from their efforts. The supply chain is a multi-
organizational team that should be working together. Although
the buyer has the most to gain, the suppliers and the
transportation companys observations can often times lead to
improvement in the manner the supply chain functions. An
integrated supply chain should benefit all participants.


Demand planning is a multi-step operational supply chain
management (SCM) process used to create reliable forecasts.
Effective demand planning can guide users to improve the
accuracy of revenue forecasts, align inventory levels with peaks
and troughs in demand, and enhance profitability for a given
channel or product.
The approach begins with a statistical forecast. Data sources for
the forecast include planned sales orders, customer contracts and
intercompany standing orders. The final forecast is shared with
key stakeholders, such as suppliers.
Key steps in demand planning include:
Importing historical sales data
Creating statistical forecasts
Importing customer forecasts
Collaborating with customers
Managing forecasts
Building consensus forecasts
Supply and demand collaboration
Securing constrained forecasts
Confirmation with customers
Reexamining data and adjusting planning accordingly.








Supplier relationship management (SRM) is the discipline of
strategically planning for, and managing, all interactions with
third party organizations that supply goods and/or services to an
organization in order to maximize the value of those
interactions. In practice, SRM entails creating closer, more
collaborative relationships with key suppliers in order to uncover
and realize new value and reduce risk.

Supplier Relationship Management (also called Vendor
Relationship
Management) is a set of principles, processes, and tools that can
assist organizations to maximize relationship value with
suppliers and minimize risk and management of overhead
through the entire supplier relationship life cycle.
Supplier Relationship Management has two aspects, which are:
-Clear commitment between the supplier and the buyer, and
-The objective of understanding, agreeing, and whenever
possible, codifying the interactions between them.
Effective SRM requires a clear understanding of which suppliers
are the most strategic to the organization and which are less
important. Rather than viewing the suppliers on which the
organization spends the most resources as the most important,
additional factors should be considered such as:
- Risk,
- Operational criticality,
-Technical integration,
-Total value,
-Long-term fit with the organization,
-Profitability,
-Distributor services,
-Performance, and
-Loyalty
Supplier development
A buyers activities to improve a suppliers performance
and/or capabilities based on the following approach
1. Identify critical products & services
2. Identify critical suppliers
3. Form a cross-functional team
4. Meet with top management of supplier
5. Identify key projects
6. Define details of Agreement
7. Monitor status & modify strategies
Supplier Relationship Management (SRM)
Improves profits & reduces costs.
Refers to extended procurement processes such as
sourcing analytics, sourcing execution, procurement
execution, payment & settlement, supplier
scorecarding and performance monitoring.
Five key points of an SRM system
1. Automation handles routine transactions
2. Integration spans multiple departments, processes, &
software applications
3. Visibility of information & process flows
4. Collaboration through information sharing
5. Optimization of processes & decision making
Trends in Supplier Relationship Management
Sourcing & procurement are increasing in importance in
organizations. They are becoming more strategic
More companies expect more cost reductions to come from
their procurement functions
Staff is being reallocated from low-level transaction
activities to more strategic & higher value-added positions
Companies with effective transaction activities tend to
reduce costs better & have strategic & automated systems