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What is Supply Chain Management (SCM) in ERP?

Supply Chain Management
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Summary: Supply chain management is a crucial segment of any industry. Monitoring the entire process of the supply chain is intricate and time-consuming. Plus, the methods followed for the supply chain’s efficient function are constantly evolving. The intervention of technology has paved multiple ways for the supply chain network to function with more agility and efficiency. ERP Software has been a supportive tool for the manufacturing industries to work more effectively. Now ERP System has undergone a lot of updation so that business operations can be conducted with more integrity, transparency and accuracy, saving a lot of time.

What is Supply Chain Management (SCM)?

SCM or supply chain management is the process of monitoring the entire supply chain network, from the procurement of raw materials to delivering the finished product to the customer. The main focus of SCM is to ensure maximum quality of the goods, safe and on-time delivery, best customer experience and significant profitability. In addition, the executives must monitor the continuous flow of goods, data and finances to prevent blockage and confusion. The impact of the supply chain’s actions is reflected in the business, whether positive or negative—better supply chain management results in achieving happy customers and ROI.

Examples of Supply Chain Management

Two examples of supply chain management are explained below : 

Generic Supply Chain Management

  1. Sourcing and selection of raw materials.
  2. Raw materials are collected by the logistics provider and given to the supplier(wholesaler).
  3. Later the raw materials are supplied to a manufacturer, wherein it undergoes a manufacturing process and is converted into a finished product that the consumer can use.
  4. The product is then distributed to the wholesaler, who sells it to the retailer.
  5. The retailer sells the product to the customer completing the entire cycle. Again the same process is repeated.

SCM

Supply chain for an e-commerce company

  1. The supply chain management of e-commerce is different from the generic module. E-commerce company sell their products using online platforms.
  2. The customer places an order for the product on the website. Then the product order is processed by checkout cart or third party product such as Shopify.
  3. Then the customer uses payment processors like G pay to pay for the product. Then the function of the SCM gets into action.
  4. As soon as the order is placed, the warehouse is notified and prepares the product to be taken by the logistics provider or in-house.
  5. The logistics provider then ships it to the shipping company, who then delivers it to the customer at their doorstep.

Supply Chain Management

Components of Supply Chain Management

Supply chain management functions are based on five major components :

  • Planning 

In supply chain management, planning the entire supply chain process is essential. Plan to execute effective supply strategies to match customer demands. Create a framework to maintain continuous supply and flow of raw materials to meet manufacturing demands. Large manufacturing industries rely on ERP systems to predict future supply chain requirements and plans.

  • Sourcing

Sourcing raw materials for the manufacturing process is a complex task:

  1. The raw materials have to meet the set quality demands.
  2. The price of the raw materials should meet market value.
  3. The supplier should assure a continuous supply of raw materials even during unforeseen events.

Make sure that the vendor supplies the raw materials on time. Especially when sourcing perishable goods, the vendor must be cautious. So, choose a vendor complying with your company’s supply chain needs.

  • Manufacturing

Manufacturing is an integral part of supply chain management. In this process, the raw materials are blended and transformed by using machinery, labour or other forces into a finished product that the consumer can use. But, manufacturing the finished product is not the final step of SCM. The next step is to assemble the product, inspect its quality and features and finally pack it carefully.

  • Delivery and logistics

In this stage, products are finally packed, ready to be shipped and delivered to the customer. A company should have robust logistic capabilities and delivery channels to reflect its brand image. Always plan to have a backup in case of any temporary distribution emergency.

  • Returning

The final part of the supply chain process is receiving product returns. Customers usually return the product if it is found to be defective. If the error is on the company’s part, it reflects the brand’s image. So this return process is called reverse logistics. Companies should be prepared with a plan to collect the product and return the customer’s refund.

However, it must be noted that customer returns are not just interactions between the customer and the company. Customer returns indicate the company inspects the defective, expired and non-conforming goods. Find out how many faulty products have reached the customer. It is the company’s responsibility to recall the product to save brand image.

<<<Also read: What are the main Features of Supply Chain Management?>>>

Challenges of Supply chain Management

1. Cost Hike

Throughout the supply chain management channel, costs have been increased, and profit margins are under sheer pressure. There is a lack of visibility and accountability, which apparently increases operational costs. Also, many factors are responsible for this price hike, including an increase in fuel price and commodity prices and high labor costs from manufacturers and suppliers.

Some complicated international logistics are shifting towards high charges for quick transfer and storage of product management. Also, commodity prices are on a hike due to the increasing cost of raw materials.

2. Complexities due to Multi-Channels

Customers prefer buying products through multiple channels. As the market expands, the supply chain should adapt. Hence, supply chain managers are required to generate variations on functions to address every channel. Also, it has become mandatory for managers to manage multiple supply chains, varied organizations, and third parties. This would ensure a better customer experience irrespective of how customers receive and order products. The rising complexities in the supply chain owing to multiple channels are a significant challenge for the sectors. 

Today, eCommerce websites are selling products to customers directly, requiring local logistics and quick delivery. Also, traditional wholesalers need large storage spaces near metro areas and precise inventory control. This will ensure that the products are available in ample amounts during the supply chain process.

3. Risk Factors in Supply Chain

Environmental fluctuations, economic pressures, international complexities, and trade-related conflicts directly or indirectly pressure the supply chain sector. However, these pressures can turn into risks and issues through networks. And this causes significant problems. 

Today, customers and clients are spread across the globe, which needs keen coordination and management. However, creating additional steps to the supply chain produces high complexities for downstream and upstream members. In terms of compliance, regulations, and quality management requires rigid agreements, controls, and contracts, which is a difficult challenge to overcome. Supply chain management managers are advised to produce contingencies along with mitigation action strategies to eliminate risks and manage them efficiently. 

4. Volatile Nature

Complexities and volatile nature create problems in supply chain management while also affecting the entire infrastructure. Dealing with these issues promptly is one of the tough challenges for managers before developing bottlenecks and more. The increase in the number of internationally sourced goods is causing port congestion. It pressurizes trains, ships, and trucks that require loading, unloading, and more functionalities. 

Some political situations are responsible for making tariffs throughout trade routes. It has resulted in additional fees and increased processing time of customs. Moreover, there has been a shortage of skilled drivers in trucking capacity. Due to the increasing pressure on the drivers, they are finding less lucrative jobs. And hence, logistics are facing difficulty attracting or retaining the right persons.   

5. Accountability & Compliance

Organizations are bound to consider social compliance while doing business across the globe. But, the supply chain sector is currently facing several unethical practices, including child labor practices, low wages, and more. Over time, verifying supply chain management partners to follow the standards has become essential. 

Managing risk-related issues is one of the top concerns for managers. The problems include legal issues and brand damage that causes irreparable damage to businesses affecting profit.

6. Quality Defects & Language Restrictions

Quality defects are pretty hard to manage since there are a lot of differences in accepting the defect stages in different countries. It is necessary to check the quality level and the ratio of acceptable defects in the coming time. 

Also, various countries conduct daily operations in different languages, which is again a challenge in the industry. To resolve these issues, supply chain management businesses should hire professional interpreters having skilled knowledge. This way, the language barriers can be eliminated.

<<<Learn more: Explained: Logistics vs Supply Chain >>>

Sage X3 ERP

Sage X3 ERP for Supply Chain Management is a feature-rich ERP Software solution that adds real essence to the complete supply chain management, including inventory management, material procurement, end-to-end customer product delivery, and more. The enterprise resource planning software has the potential to coordinate and integrate significant flows, including information flows, material flows, and financial flows. Make precise execution, control, planning, and monitoring in the supply chain management with Sage X3

 

How does Sage X3 combat the challenges mentioned above?

Inventory Management

Easily track and manage the availability of raw materials, spare parts, and stocked goods. Get updated asset management, future inventory, barcode integration, price prediction, and more with this supply chain management feature.

Track logistics and shipping

Coordinate appropriately with transportation channels, enhance customer satisfaction, and improve delivery management with an ERP system.

The logistics and shipping feature of Sage X3 supply chain management software helps with storage optimization, labor management, labouring, and much more functions.

Precise forecasting

With the specific forecasting feature of this supply chain management software, you can easily predict customer demands while planning the procurement and production processes accurately.

Eradicates the need to buy unnecessary raw materials or to store additional finished products in warehouses. This way, it reduces the overall cost of management.

Real-Time KPI

Sage X3 offers team members instant and latest updates on customer orders, inventory levels, and additional key factors. It aids businesses in tracking and monitoring supply chain problems which would help make quick decisions.

Moreover, by integrating ERP in supply chain management, Sage X3 supply chain management software would offer you the ability to analyse real-time KPIs. This helps check opportunities and concerns to make respective process adjustments and improve results.

Full Automation

Sage X3 enterprise resource planning software offers high-tech automation with which your supply chain business can save a lot of time. Your team can work more efficaciously by automating data inputs and other business functions while dedicating more to the most crucial tasks of the supply chain business.

With the highly integrated supply chain management SCM software solution, your business can make software needs simplified while minimizing human errors.

 

How does Supply Chain Management Software increase productivity?

In addition to effective planning, forecasting, and simple collaboration, an ERP is a boon in boosting supply chain efficiency in business disruption. We know that market disruptor are tough to compete in every industry, and if one hits your business, you should be able to get these changes quickly to complete the job.

Critical issues such as pandemics have shown how essential it is to have proper responsiveness and preparation to stay abreast of the competition. Today, businesses have been focusing on supply chain adaptability, speed, and risk management while not considering cost savings as a significant factor. Their goal has been to respond to customers’ requirements through flexible sourcing or connected supply chain networks. 

Sage X3

Sage Software Solutions is a leading IT company with an array of advanced ERP software solutions. Our proprietary products — Sage X3 and Sage 300 will help you cut your operational expenses, improve business productivity, increase operational efficiency, forge robust customer relationships, and strengthen association with vendors, suppliers, and distributors. So, if you are looking to reinforce your business fundamentals and emerge as an industry leader, then please schedule a call with one of our sales representatives.

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