What is SCM (Supply Chain Management)?
At its most basic level, supply chain management (SCM) is managing the flow of goods, data and finances related to a product or service, from procurement of raw materials to delivery of the product to its final
destination.
Although many people equate supply chains with logistics, logistics is actually only one component of the supply chain. Today's digital-based SCM systems include material handling and software for all parties
involved in product or service creation, order fulfillment, and information trackingsuch as suppliers, manufacturers, wholesalers, transportation and logistics providers, and retailers.
Supply chain activities include procurement, product life cycle management, supply chain planning (including inventory planning and maintenance of company assets and production lines), logistics (including transportation and fleet management), and order management. SCM can also include activities around global trade, such as managing global suppliers and multinational production processes.
History of SCM
Supply chains have existed since ancient times, starting with the first product or service created and sold. With the advent of industrialization, SCM has become more sophisticated, allowing companies to do a
more efficient job of producing and delivering goods and services. For example, Henry Ford's standardization of car parts was a breakthrough that enabled the mass production of goods to meet the demands of a growing customer base. Over time, incremental changes (such as the invention of computers) have brought additional levels of sophistication to SCM systems. However, generation after generation, SCM has remained essentially a linear, isolated function managed by supply chain specialists.
The internet, technological innovation and a booming, demand-driven global economy have changed all that. Today's supply chain is no longer a linear entity. Instead, it is a complex collection of different networks that can be accessed 24 hours a day. At the heart of this network are consumers who expect their orders to be fulfilledwhen they want it, on their terms.
What is SCM (Supply Chain Management) Software? (1:47)
We now live in unprecedented times of global business and trade, not to mention continued technological innovation and rapidly changing customer expectations. Today's best supply chain strategy requires a demand-
driven operating model that successfully brings together people, processes, and technology in an integrated capability to deliver goods and services with extraordinary speed and accuracy.
While SCM has always been a cornerstone of companies, today's supply chain is more important than ever as a marker of business success. Companies that can effectively manage their supply chains to adapt to today's volatile and ever-changing technology-
based business environment are the companies that will survive and thrive.
Industry 4.0 and SCM
The application of radical new technologies to manufacturing is currently being called , or Industry 4.0 "the fourth industrial revolution". In this new era of industrialization, technologies such as AI, machine learning, Internet of Things, automation, and sensors are changing the way companies produce, maintain, and distribute new products and services. Industry 4.0 can be said to be built on the supply chain.
In Industry 4.0, the way companies apply technology to the supply chain is fundamentally different from how they applied it in the past. For example, in the maintenance function, companies usually wait until a machine breaks down to repair it. Smart technology has changed that. We can now predict failures before they happen, then take steps to prevent them so supply chains can continue running without disruption. Today's SCM is about using technology to make supply chainsand companiessmarter.
Industry 4.0 SCM also provides significant advantages over traditional SCM as it enables aligned planning and execution while providing major cost savings. For example, companies operating on a "plan-to-produce" model---where product production is tied as closely as possible to customer demand---must make accurate forecasts. This involves regulating a number of inputs to ensure that what is produced will meet market demand without exceeding it, thereby avoiding costly overstocks. Smart SCM solutions can help you meet
customer demands and financial goals at the same time.
Intelligent SCM also has other advantages. For example, it can give supply chain employees the freedom to contribute to the business in ways that add value. Better SCM systems that automate everyday tasks can equip supply chain professionals with the tools
they need to successfully deliver products and services designed for supply chains.
Today's SCM is all about the customer
SCM has historically aimed to increase efficiency and reduce costs.
While these needs have not changed, what has changed is that customers now play a leading role in setting SCM priorities. There is a saying that "customer experience lives and dies in the supply chain."
Customer loyalty is based on a company's ability to meet customer expectations quickly and accurately. Raw materials, manufacturing, logistics, and merchandising and order
management must all be coordinated to deliver specific goods to customers within a reasonable timeframe. To achieve this, companies must view their supply chain through the customer's eyes. It's not just about getting orders to customers on time; it's about doing everything at the right time---before, during, and after order delivery.
Supply chains and their need for agility
Today's supply chains are broad, deep and ever-evolving, which means they must be agile to be effective. In the past, supply chains met company and customer needs through a start-tofinish model that was largely unaffected by change. Consumers now have many choices in
how they buy products---in stores, online, and more. They also expect increased levels of customization.
An agile supply chain can meet these expectations.
Not only that, supply chain procurement has become very fluid. For example, geopolitical and economic developments can have a major impact on manufacturing supply chains. If a manufacturer needs aluminum and cannot obtain it from one supplier due
to trade policies, then the manufacturer must be able to quickly switch to sourcing aluminum elsewhere. The ability to reconfigure your supply chain quickly is critical to successfully navigating
a scenario like this.
Agility is critical to achieving this kind of real-time reconfiguration.
Challenges in the supply chain do not only include efficiency and cost management issues. Changes in circumstances may also impact regulatory compliance. Your SCM system must be flexible enough to mitigate all impacts caused by changes in the supply chain, including
changing and varying regulatory requirements.
An intelligent SCM system can help you be more efficient and reduce costs while remaining compliant with ever-changing legal mandates.
The future of SCM
The supply chain of the future is about responsiveness and customer experienceunderstood and managed in a network, not a linear model. Each node in the network must be aligned and flexible to consumer needs while being able to address factors such as procurement, trade policies, delivery methods, and more.
Advanced technologies will be increasingly used to increase transparency and visibility across these networks, as well as to better enable connectivity and utilization of SCM. The entire SCM planning function will become smarter in taking into account consumer demand. The ability to adapt will become a mandate.
In the past, supply chain planning was a business activity carried out periodically. In the future, this will continue. Future SCM systems will also bring closer alignment between planning and execution, which is not the case
is the current state of affairs for most companies. The need for speed and accuracy in SCM will continue to increase. Ensure your supply chain is future-ready by supporting it with an intelligent SCM system.
