The Future of Supply Chain Management

By Katrina C. Arabe

It's not enough to pinpoint and tackle your supply chain's problem areas. Firms have to consider all distribution chain participants and how they work together. And this is exactly where SCM is heading.

By Alan S. Kay

Supply chain management (SCM) remains a high priority for manufacturers as a way to improve margins and retain and increase market share.

"Supply chain management remains at the top of the agenda for many enterprises today as a way to reduce operating costs and be more responsive to customers," reports Jeff Woods, senior analyst at Gartner Inc., Stamford, Conn.

One thing has changed, though: the scope of SCM deployment projects. Gone are the plans for large transformative deployments. Today's executives, driven by the need to conserve cash and show results in the current fiscal year, have narrowed their focus to improving specific aspects of their supply chains.

A growing understanding that optimizing supply chain flow at the department or factory or warehouse level is not necessarily the same as optimizing to the bottom line is driving SCM's motion in 2003. "Sometimes," observes Steve Banker, service director, supply chain management at ARC Advisory Group, Dedham, Mass., "you can manage your supply chain efficiently in the factory, but you're creating downstream inefficiencies."

Banker and others contend that a company's approach needs to be holistic and take into account issues across an extended supply chain. The activities of contract manufacturers, third party logistics firms, internal and external warehouse operators and other parts of the distribution chain all have to be considered as part of the supply chain. In this scenario, one node may carry higher costs so the supply chain as a whole can save money.

Supply chain management today consists of two sets of processes with different time horizons. Supply chain planning is the process of managing strategic and tactical operations planning, while supply chain execution involves the tactical steps necessary to meet the demands of that plan by managing transactions.

The success of supply chain management at this strategic level requires considerably more integration with other enterprise systems. Since many business targets and performance indicators are established in the budgeting process, efficiency demands that the planning, budgeting, sales and marketing, and SCM systems talk with one another. Gisela Wilson, director of product lifecycle management solutions program at International Data Corp. (IDC), Framingham, Mass., reports that the ability to integrate with other back-end systems has become one of the most important features of SCM tools.

Among the key features in best-of-breed SCM solutions are:

Optimization tools to help identify the realistic solutions that best fit the company's criteria

Modeling capability to allow creation of realistic models of your business

Collaboration tools to support business partner involvement

Analytics to evaluate and report performance relative to key performance indicators

Integration to other enterprise applications

It should come as no surprise that vendors of enterprise financial and ERP systems are acquiring SCM companies and gaining traction in the SCM space. SAP, for example, emphasizes SCM as a module within its mySAP business solution suite, giving it a significant edge among SCM seekers that already are SAP users.

Wilson predicts that the integration of SCM into multifaceted back-end tools such as warehouse management and distribution tools will proceed to the point where in three or four years we won't even talk about the supply chain anymore.

There is broad agreement, however, that for companies with clear-sighted goals and some money to spend, now is a good time to acquire modern SCM capability cost-effectively.

For more information about which supply chain and ERP vendors support back-end warehouse and other distribution functions, visit http://www.EnterprisesoftwareHQ.com. It has a detailed listing of SAP, Manugistics, i2 Technologies, Epicor, IFS, Glovia and other relevant vendors, and their products. In addition, you can review thousands of functions now provided by SCM and ERP software vendors to determine which ones would be useful for your organizations' supply chain and distribution efforts.

Edited by Larry Marion and Debra Bulkeley



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