April 23, 2001, 9:50 AM — IT'S NO LONGER about becoming a powerhouse but simply about remaining competitive. To maintain a strategic position in today's marketplace, companies must demand a greater level of enterprise efficiency. And that's why automating the supply chain via the Internet has become so popular.
Internet-based SCM (supply-chain management) solutions link all of your customers, suppliers, factories, warehouses, distributors, carriers, and trading partners in one virtual enterprise. These solutions replace linear SCM models with a circular model that offers greater interaction and responsiveness.
But SCM is not without its shortcomings. E-marketplaces, once thought to be the saviors of supply-chain efficiency, have proved less than fruitful. Cross-vendor incompatibilities complicate the search for the right mix of solutions to integrate the supply chain from end to end.
Nevertheless, a company can use an SCM solution to achieve a competitive advantage and broaden its profit margin. By providing greater visibility throughout the supply chain -- from planning and procurement to point-of-purchase -- businesses can reduce expenditures, improve operational efficiency, and respond more quickly to customer demands.
Planning an SCM implementation
When developing an SCM strategy, you should begin by evaluating how the links in your supply chain fit together. SCM doesn't so much require the employment of a specific technology or solution as it demands an understanding of the business processes that must work together.
Most likely, your SCM solution will seek to incorporate existing systems such as e-commerce, business and planning, manufacturing and control, and sourcing and distribution. Your SCM solution will typically include, for example, material sourcing, forecasting, warehousing, inventory planning, transportation, purchasing, and financials.
This integration must be accomplished not only within your own enterprise but within those of your customers and suppliers (and often their customers' and suppliers' systems as well). This stage is likely to incur additional expense. Processes within all of these organizations must be evaluated and updated or even overhauled to meet efficiency and logistical expectations.
Larger SCM packages bundle a variety of capabilities to improve accessibility to and integration of the supply chain throughout the enterprise. Naturally, the broad scope of these solutions, which integrate multiple business functions much like ERP (enterprise resource planning) applications, imposes difficulties in implementation.