Supply chain is the term used to define the system of organizations, assets and activities involved in the conversion of raw materials into finished products and moving the product or service from the supplier to the customer. Supply Chain Management (SCM) is defined as the efficient integration of warehousing, manufacturing, logistics and distribution. In lay mans’ terms, SCM is ensuring that materials are available at the correct point in the correct amount at the correct time.
The primary objective of SCM is to minimize the costs involved the sourcing, warehousing, logistics and distribution.
The major obstacles in SCM are:
- Purchasing
- Unstable volume requirements.
- Delivery schedule.
- Large volumes.
- Manufacturing
- Production cost.
- Quality requirements.
- High productivity.
- Warehousing
- Optimized inventory management.
- Transportation management.
- Quick replenishment capability.
- Customer delivery
- Diverse product portfolio.
- Reduced backorders and lead time.
- Bullwhip effect.
As understandable, traditional methods of demand forecasting, vendor rating, procurement ordering takes a lot of time and effort. In today’s proactive and competitive world and delay in demand orders are inventory management can add to the bullwhip effect resulting in loss of money and efficiency. In a cost sensitive market this difference can result in the final product cost thus making the product dearer to the customer and can therefore influence the profit margins.
One of the major advancements in terms of SCM is Enterprise Resource Planning (ERP). This automated software which helps in streamlining the supply chain operations and also holds the records and data at a central repository so as to ease retrieving the data. The limitation of ERP is the requirement of the software and the compatibility and hence it is used largely within an organization and does not link suppliers to the customers.
