SCM, also known as Supply Chain Management, is the concept or a scientific approach, used in highly professionally managed manufacturing organizations. In this technique, a proper checks and control are kept and monitored in the production of any product from procurement of required Raw Material to production to its end use at consumer end.
It is bit complicated to manage and execute SCM in any organization but normally organizations implementing SCM also implement SRM (Supplier Relationship Management) and CRM (Customer Relationship Management). SO now it becomes easy to implement SCM as two core functionalities are already being managed and working fine. Now only in-house process flow from Raw material stock to production to shifting Finish goods in FG godown and then Logistic is required to map with the process and SCM finally implemented.
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
- Raw Material Inventory stock for present and future market estimations on price segment
- 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.
- Logistic and distribution network analysis for holidays and weather
- Market demand analysis based on trends and CRM analysis
- Market demand analysis based on past history available
How SCM Works
It may be quite confusing for those who are new to this world but quite interesting who are already working in this domain.
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
- Customer Demand (Make to Order)
- 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.
Now starts reverse engineering for getting requirements of Raw material to produce the demands. This is also known as MRP (Material Requirement Planning) This analysis is conducted based on BOM (Bill of Material) of that particular product and then analyzing the procurement needs 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 and analyzed for manufacturing the products. These resources include all three M (3M), Men, Machine and Material. Here for product costing analysis a complete analysis of Raw Material, Machine utilization based costing and Man power required also considered. This gives detailed insight of product costing in-turn profitability in manufacturing the product.
Now based on product cost analysis, it is the sole decision of management whether said product should be manufactured or not. Most of the time if profitability is less as compared to profitability required to run the business, idea of manufacturing dropped. But it is always not the same as some time it is considered to produce as it is among the the important and high demand products and to remain in competition, less profit is also gets compromised.
How SCM helps Management
- Strategic Sourcing of Material helps management in long term Strategic production planning and further can be monitored for planned and execution time variations.
- 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 reduce wear and tear of machines in effective way that in turn helps in good saving in machinery spare costing.
- Good maintenance reduces break down time means 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.
- Real time centralized data of vendors and customers with transaction behavior help in taking strategic decisions,
- Dependency on departmental users lowers
Who should Implement SCM
- Organizations, want honestly to decentralize the power by delegating it based on Roles and Responsibilities can think to implement SCM.
- Managing SCM is not an easy 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 genuinely furnished, it will be total waste of money and resources consumed.
- Organizations, have a culture of information sharing among all stakeholders
- Organizations, have trust, bonding and respect for all stakeholders falls in the process net.
- Even primary level executives have power to take decision that are not strategic but is important for fast action.
- Task approval process is fast and simple instead of a lengthy process to get approval for even a very small activity to be done. It 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