Supply Chain Complexity
The most basic version of a supply chain includes a company, its suppliers, and its customers. This chain might look like this: raw material producer, manufacturer, distributor, retailer, and retail customer.
A more complex or extended supply chain is likely to include a number of tiers of suppliers and supplier’s suppliers; a number of customer or end customers; and all the organizations that provide necessary services to get products to customers, including third-party logistics providers (3PLs), financial organizations, supply chain software vendors, and market research providers. These entities also use the services of other providers.
This whole array of organizations, evoking the metaphor of an interwoven web rather than a linear chain, shows why supply chain management is so complex. This complexity also points to the kinds of issues that can arise from demand planning issues, such as a new iPhone release stifling demand for older iPhones, to natural supply chain disruptions like transportation halts due to severe winter weather or droughts wiping out agricultural products, to political developments like labor strikes gumming up the movement of goods at the nation's container ports.
In response, companies are increasingly using supply chain risk mitigation strategies, such as liaising with key suppliers and analyzing their financial stability. Some use specialized supply chain management tools to automate risk monitoring and assessment.
Supply chain resilience is an umbrella term for strategies organizations use to ensure their supply chains are sustainable and can withstand risks from many quarters, financially, socially, environmentally, or politically. As supply chains have become more global, regulatory compliance issues have increased, with business partners facing local regulations. Despite the need, the market in specialized supply chain resilience software is fragmented, and most companies use other tools and processes to address the issue.
Procurement vs. Supply Chain Management
The terms supply chain management and procurement are often mistakenly used interchangeably. However, procurement is only one important and vital component of supply chain management. It focuses on the efficient movement of a product or material to get it to the right place at the right time. It manages activities like packaging, transportation, distribution, warehousing, and delivery.
In contrast, SCM encompasses broader activities such as strategically sourcing raw materials, securing the best price for goods and materials, and coordinating cross-functional efforts within the supply chain network of partners, to name just a few.
The Role of SCM Software
Technology is crucial in modern supply chain management, and every major supply chain management process has a software category devoted to it. Most ERP vendors offer supply chain management software suites, and thousands of niche vendors exist.
In addition to managing specific processes, SCM software plays a crucial role in linking the people, processes, and systems involved in a company’s supply chain.
Other SCM modules in use include:
- A transportation management system (TMS) for managing the transport and storage of goods, especially in global supply chains.
- A warehouse management system (WMS) for all activities inside warehouses and distribution centers.
- An order management system, for executing customer order processing through WMS, ERP, and TMS systems, across all stages of the supply chain. (See "How Supply Chain Systems Process Orders.")
The increasingly global nature of today’s supply chains and the rise of e-commerce, with its focus on near-instantaneous deliveries to consumers, create challenges, especially in the areas of logistics and demand planning, while fueling demand for order management software that enables omnichannel commerce. A number of strategies—such as lean manufacturing—and newer approaches—such as materials requirements planning—may prove useful.
SCM
Technology—especially big data, predictive analytics, IoT, supply chain analytics, robotics, and autonomous vehicles—is also being used to help solve modern challenges, including supply chain risk and sustainability. Most emerging technologies share the common goals of gathering more accurate supply chain data and analyzing and acting on it quickly.
As just three examples, IoT blockchain logistics technologies—distributed, tamper-resistant electronic ledgers—can ensure the authenticity and ownership of documents used in supply chain logistics and the millions of other documents that change hands across the global supply chain every day.
