What is SCM? This is a question that those interested in corporate governance seek. Especially in the management of the production of goods to consumers. So what is it? And how important is SCM for businesses?
What is SCM?
Abbreviation of the word Supply Chain Management, abbreviated SCM, a supply chain management system is a system that allows management at factories and in the whole system of supply points of a company for customers.
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The role of SCM in chain management
Supply Chain Management
This is the activity involved in managing all product sourcing, purchasing, shipping and output. Moreover, for each business, it is of great significance to help businesses develop sustainably. This builds good relationships with suppliers, servicers and customers.
Managing the supply chain
Supply chain management is inclusive of all the smooth activities of the stakeholders, whose key person to maintain the supply chain is the business.
Application of SCM
SCM application tracking products and services from suppliers to customers. It manages logistics requirements and the ways products reach the end customer.
The functions of SCM include: supply chain optimization, event management, inventory management, RFID management, circulation management. In addition, SCM may also include international trade management, supplier relationships.
Benefits of using SCM
Improve the efficiency of product lines through the combination of suppliers. Improve customer service and minimize inventory. Reduce your product inventory costs. Reduce the cost of each product and improve profits to the optimal level. Reduce unnecessary costs for businesses. Enhance the competitiveness of companies. Establish a supply chain between traditional partners. Respond quickly to market changes and reduce factors affecting customers.
Risks of using SCM
– If choosing a wrong SCM system can affect the entire business activities of the company, from raw materials to production to distribution system.
– The SCM system is not compatible with administrative tools such as the bookkeeping system, the business software being used can lead to the destruction of the entire business operation.
– Business forms with multiple branches, partners, and representative offices can lead to unanalysable disturbances.
4 elements of a comprehensive supply chain
Distinguish between SCM and LOGISTIC
In fact, many businesses or managers confuse these two terms. Everyone thinks that SCM and Logistic can be substituted and complement each other.
However, the term Logistics is part of Supply Chain Management. Logistics is the activities within a certain organization while Supply Chain is a network of links between companies working together.
Traditional logistics focuses on activities such as purchasing, distribution and inventory management. SCM also includes: Marketing, new product development, finance and customer service.
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SCM covers all logistics activities and processes between departments and between companies. Logistics management is a part of supply chain management (SCM), which includes activities that help manage the flow of goods efficiently.
Importance of the supply chain to businesses
The market competition is getting higher and higher, along with that, the price in the raw material market is getting tighter and tighter. Therefore, the supply chain plays a very big role, it directly affects the company’s operations.
Good supply chain management practices help businesses gain a competitive advantage. Overall, the importance of supply chain management provides the following benefits:
Supply chain cost scm reduced by 25-50%Inventory reduction by 25-60%Production forecasting accuracy increased by 25-80%Improved order supply cycle by 30-50% Increase profit after tax up to 20%
4 steps to building an effective supply chain
Supply chain management (SCM) requires developing an effective supply chain strategy. Your supply chain strategy should focus on efficient inventory transfers and moves. It is the only effective way to balance the often unpredictable difficulties of customer and supplier demand.
Your strategy should be in line with the actual business situation and customer requirements. Here are the 4 key steps needed to develop an effective supply chain strategy:
1. A holistic view of SCM:
Supply chain management requires more than just sales and inventory information. Forecasting technology has become much more reliable and detailed.
Supply chain strategy should involve integrating two-way information flows. That it can satisfy the demand signal this in a timely manner.
2. Keeping up with the industry’s SCM trend:
Each industry has its own set of demand controllers, industry standards, and supply chain management protocols. These changes develop over time. Stay up to date with information on SCM development trends. This will help you have a more effective management strategy.
Stay up to date with SCM trends
3. Understand your company’s SCM USP:
What is your competitive positioning in the supply chain? Will the minimum requirements make you a good choice for clients? What factors can differentiate you from your supply chain competitors?
Your strategy should focus on that differentiation and the added value you can deliver through your supply chain.
4. Combine risk management with supply chain management:
Identify risks for optimal performance of all internal and external factors. What are the weakest or least secure links in your supply chain? How can you minimize the risks? Come up with action plans!
Then identify alternative providers or shipping resources. And assign team members to specific response actions when something goes wrong in the supply chain.
Finally, execute your strategy in a way that can continuously monitor performance. Also track the right adjustments to enable improvement.
Supply chain strategy development requires constant monitoring and adaptation. The market is always fluctuating and changing. So do your customers and suppliers. Through continuous improvement, your strategy quickly adapts and responds to change.
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