In a previous blog post, I discussed two approaches to bringing down the overall cost of your supply chain (by using either cost-cutting or -reducing methods). Another blog was about bringing cost down by using better or best inventory management processes and practices. As we have already discussed the methods, processes, and practices, let’s look now at some of the technological aspects of reducing cost.
The first question that comes to mind is: will supply chain software help reduce the cost of the supply chain? So the riddle is to have or not to have supply chain software within your organization…?
For an organization to be efficient and profitable—i.e., successful—a well-managed supply chain is critical. In today’s market, customers’ needs are changing so rapidly that organizations must be quick to respond to these rapid changes while making sure the cost of materials and finished goods stays low. Supply chain management (SCM) software helps organizations achieve this low pricing for their customers by providing better visibility into changes in customers’ demands, enabling negotiation of best possible prices from suppliers, helping optimize inventory levels at various stages of processes, consolidating distribution networks, and optimizing freight and logistics.
So do all of these concerns mean SCM solution market has not see a change in demand for SCM solutions, even though the entire worldwide economy is in a downturn? It’s true the enterprise software market has slowed down, but the market for SCM solutions is still in rapid growth state. According to AMR Research group, the worldwide market for SCM software is expected to reach or exceed $8 billion by 2010.
Now the question: what does supply chain software encompass that makes it so crucial for all types of organizations? Firstly, we need to understand what SCM is. Basically, it’s a combination of science and software that brings together all the steps within a supply chain—sourcing, procurement, inventory management, advance planning and scheduling, and warehousing and distribution. With the help of SCM software, organizations are able to organize and automate the forecasting, planning, execution, and control of these significant processes.
As well, flexibility within SCM software is essential to being able to integrate with third parties who are involved in an organization’s supply chain, toward providing end-to-end visibility. SCM software is developed to provide organizations with advance capabilities for data communication, collaboration, and coordination with vendors and suppliers, as well as transportation and shipping organizations. The chain does not end here; other partners of suppliers and vendors as well need to be incorporated within the whole supply chain software network.
Another question arises: what are the cost benefits for your organization to implement SCM software? Here are some important factors:
Now the time has come to answer the riddle about whether you should have SCM software within your organization or not. For many organizations, the supply chain network is becoming more multifaceted; for this reason, many organizations are facing multiple challenges in managing their enormous networks. Any company with a complex network of suppliers, vendors, and other partners can see rapid benefits from a SCM software implementation. SCM software helps the organization make its operations run more smoothly throughout its supply chain, from timely execution to delivery of product.
Supply chain software solutions are not just for manufacturers or production plants; in today’s marketplace, everyone is beginning to benefit from using supply chain software. For example, retailers and service providers are a couple of examples of the types of organizations that are using SCM software to boost efficiency and gain visibility throughout their networks. Higher visibility of what’s happening during each process within a supply chain has helped organizations achieve considerable return on investment (ROI).
Once SCM software is in place at an organization, it gives that organization the ability to produce and deliver only the amount of product needed, when it’s needed—without any delay. As noted in my previous blog about better inventory management, an organization’s main objective from its supply chain is to have the right inventory, at the right time, at the right location, and in the right quantity. Basically, it is more than just visibility into the supply network; it’s collaboration within the network as well.
Nobody says it’s easy to integrate SCM software within an organization’s enterprise structure. SCM software could be added on to an organization’s current enterprise resource planning (ERP) application, or it could just replace some manual process done on spreadsheets or in a Microsoft Access Database. To maximize cost savings, it is key to have a SCM software that is capable of integrating with other systems—ERP, customer relationship management (CRM), accounting, or financial modules—for better information flow and ROI. As well, many parties both internal and external play equally key roles in SCM’s success. We have a perfect example of this in the relationship between Wal-Mart and Procter and Gamble (P&G). By implementing SCM software, Wal-Mart gained by having the right amount of inventory on its shelves, while P&G knew exactly what was needed, when it was needed, and where it was needed.
Keep in mind that employees of organizations should never be threatened by use of an application or software. To have a successful supply chain application in place, it’s important to merge the expertise and knowledge of employees with the software. This will bring greater ROI and profitability in the long run. As well, a system is often only as good as its users and the data input into it.
Essentially, it’s important to ask questions before any kind of software implementation, to find out if you need a new SCM solution or not. Once that is out of the way, try to find the software that is most compatible with your business and that will integrate with your current applications and systems. Lastly, remember to have a dependable software provider by doing research on its size, global reach, and financials—but never overlook a review of its past customers and current customer feedback in order to get a complete picture of the software provider’s strengths and weaknesses, as well as the strengths and weaknesses of its software product.
In my next blog post, we will look at some of the top SCM players in the areas of inventory management, order management, procurement, logistics, supply chain planning and forecasting, return management, and incentive management.
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