What is SCM (Supply Chain Management)

What is SCM

What is SCM? SCM is also known as Supply Chain Management, is the concept used in professionally managed manufacturing organizations to control supply chain of product. The  technique uses proper checks to control the production of any product from procurement of Raw Material to finish goods production and then finally to transportation to consumer end.

At initial level it is bit complicated to manage and execute SCM in any organization. Normally organizations which are already having SRM and CRM implement SCM. It is because due to implementation of SRM and CRM, maximum work of SCM completed. Now only remaining task is to control in house production activities and then Logistics.

Goals of SCM

  • Fast and Cost effective procurement process
  • Controlling quality parameters in procurement process
  • Handling Supplier Relation to honor best deals and long term relationship
  • Checks and Control on Inventory stock in Organization
  • Controlling and handling for Material flow inside the plant
  • Controlling quality parameters of material procured
  • Controlling Quality parameters during whole manufacturing process
  • Checks for quality and packing parameters during production process
  • Checks and Controlling for maintaining FG stock at multiple godowns
  • No unwanted Finish Goods should be manufactured or kept as dead stock in godowns
  • Manufactured Finish Goods must be controlled during Sales and Distribution process
  • Logistics and Transportation is the key check points during Sales and Distribution process
  • Handling Customer Relations for long term bonding
  • Finding the way to get higher profit by lowering procurement and conversion cost while maintaining the quality parameters.
  • Analysis of Markets requirements and trend for right product to be produced
  • Controlling required stock levels of Raw Material and Finish Goods. Lowering or higher inventory from a threshold level is always dangerous.
  • Risk analysis based on

    1. Raw Material Inventory stock for present and future market estimations on price segment
    2. If manufacturing multiple products then right kind of product selection to manufacture based on requirements of man power, weather, and crops cultivation is very important.
    3. Logistic and distribution network analysis for holidays and weather
    4. Market demand analysis based on trends and CRM analysis
    5. Market demand analysis based on past history available

How SCM Works

Main goal of SCM is to fulfill needs of the customer by manufacturing and providing them the products they want. Basically this follows Demand Analysis.

 Normally, manufacturers, manufacture products by considering two dimensional matrix

  1. Customer Demand (Make to Order)
  2. Based on Past History and Market trends (Make to Sale)

Here Customer demand plays a significant role and normally it is about 70% of the total manufacturing.

Production Planning

For production planning, reverse engineering is done for getting Raw material requirement to produce the demand product. This is also known as MRP (Material Requirement Planning). This analysis is conducted based on BOM (Bill of Material) of that particular product. Actual requirement to purchase comes after deducting the stock available of those Raw Materials from demand generated.

One more conceptual definition of MRP is also used by manufacturers and this is known as (Manufacture Resource Planning). Here each and every small step and resource required for manufacturing the product is considered separately. These resources include all three M (3M), Men, Machine and Material. Here for product costing analysis a complete analysis of Raw Material, Machine utilization and Man power required is done. This gives detailed insight of product costing and profitability in manufacturing the product.

Now based on product cost analysis, it is the sole decision of management whether the product should be manufactured or not. Most of the time if profitability is less then idea of manufacturing the product gets dropped. Only if the product is important and of high demand then only considered to produce.

How SCM helps Management

  • Strategic Sourcing of Material helps management in crafting long term Strategic production planning. 
  • It reduces waste generation during manufacturing process which is a direct efficiency and machine utilization gain followed by revenue gain.
  • Alert maintenance departments for timely conducting preventive maintenance activities. to be done. It help in reducing wear and tear of machines in effective way.  It further helps to control machinery spare cost.
  • Good maintenance reduces break down time and gives gain in productivity.
  • Helps in making good inter-departmental synchronization for enhancing productivity.
  • Getting best competitive price from vendors
  • Helps in forming good relationship with customers in term of services and supply of best quality product in competitive prices.
  • Availability of real time centralized data of vendors and customers with transaction behavior help in taking strategic decisions,
  • Dependency on departmental users become low

Who should Implement SCM

  • Organizations which aim to decentralize the power by delegating it based on Roles and Responsibilities can think to implement SCM.
  • Managing SCM is bit difficult task. It requires lots of dedication and honest will power in its primary phase of implementation. This is the time when information about Suppliers and Customers are being generated. If this information is not correct, it will be total waste of money and resources consumed.
  • Organizations which have a culture of information sharing among all stakeholders can think to implement SCM.
  • Organizations which have trust, bonding and respect for all stakeholders can go for SCM implementation. 
  • Organizations where even a primary level executives have power to take decision (that are not strategic) but is important for fast action can think for SCM.
  • Where Task approval process is fast and simple can lead to implement SCM.
  • If approval process is lengthy, will lead wastage of time, resource and increase dissatisfaction level in work force.
  • Every process owner has a good understanding of its responsibilities and others need.

If organizations think they satisfy these points honestly and still have  not thought about SCM then this is the right time

Thank you very much for sparing your precious time for reading

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