Over the last decade there has been a growing interest in the use Supply Chain (SC) methods for improving the companies’ performance. Many industries have recognized the importance of integrating the SC processes/activities and as a result, SCM has become part of the standard business practices. At the same time, interest in SCM research has boomed and the continuous practice-research-practice cycle has led to the development of new concepts and the implementation of new practices.
When talking about the evaluation of SCM performance it’s important to agree on its definition. Therefore, we chose one of the most respected sources of standard definition, namely the Council of Supply Chain Management Professionals (CSCMP), according to which Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers and customers. In essence, supply chain management integrates supply and demand management within and across companies.
LM typically includes the following activities, which can be divided into three main categories:
- Transport management:establishing routes, scheduling and allocation of transport and fleet management resources;
- Warehouse management, which includes: storage, goods handling, order fulfillment, inventory management;
- Supply management, that includes the activities of forecasting, optimization and correctly dimensioning of the stocks;
To varying degrees, the logistics function also includes:
- sourcing and procurement;
- production planning and scheduling;
- packaging and assembly;
- customer service.
Observation. There are also companies where, depending on the business model, the logistics can work independently. An example in this respect is the 3PL services (logistics service providers).
Logistics involves getting in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost (the 7’S Right).
For each of these 3 major categories of activities a series of specialized software solutions were developed over time, globally known under the names of: Inventory – for the supply activity management, WMS (Warehouse Management System) – for warehouse management, TMS (Transportation Management System) and FMS (Fleet Management System) for the transport activities and car fleet management.
Joining us at CSCMP definitions and to eliminate confusion among readers and practitioners we present in Figure 1 the relationship between SCM and Logistics as follows:
Fig. 1 Relationship between SCM and Logistics
What does this representation tell us? The logistics model is part of the SC model, much broader in purpose and which integrates the processes of a complete business cycle.
To view practice above SCM definition the Apple supply chain model is presented in Figure 2
Fig. 2 The Apple Inc. Supply Chain Model ( source: scm-operations.com )
As you see, Apple Inc. purchases raw materials (subassemblies) from various sources (Sourcing) then gets them shipped for assembling in China (Manufacturing). From here, the final products are delivered to consumers as follows:
- End customers who buy Online through global courier delivery services, such as UPS/FedEx;
- Distribution channels such as retail stores, the company’s proprietary communications networks, other wholesalers through the Distribution Center Elk Grove, Calif., who owns a CALL CENTER.
At the end of the products life cycle, customers can return the product to the nearest Apple store or to recycling companies.
Is this the only representation model of a distribution chain?
a) What is the vision of a sales manager about SC Model?
In current practices, for a Sales Director this SC representation is not interesting. His sales plan contains both global and broken down by channel of distribution figures.
Therefore, for him a plot on distribution channels pattern of SC is more close to its interest.
In Figure 3 we present one of the distribution channels (the longest) of Apple SC network which represents the more traditional sales channel, namely selling through retail stores (RETAIL STORES).
Fig.3 Retail Supply Chain
As can be seen in the model of Figure 2 Apple uses a “multichannel distribution system” in order to meet one or more segments of clients.
b) How does the SCM manager see the SC model?
Performing the practical definition of CSCMP organization above, SCM includes planning, design, control and implementation of all business processes related to procurement, manufacturing, distribution and sales order fulfillment functions of a business (Figure 4).
Fig.4 A SCM model of business processes (Source: Copyright 2009 Greater Vancouver Regional District)
Contrary to popular belief, Supply Chain Management is more than just a logistics integrator. The cornerstone in achieving a flexible and efficient supply chain is the alliances between key partners and the way in which IT allows the partners to be visible end-to-end by sharing real-time information, accurate and up to date.
When we talk about performance in SC we mean integration. That is: integration of strategies, processes, organizations, information systems in order to maximize the value provided by the SC.
In this context the role of the software systems is essential, because they manage to facilitate the decision-making process and to shorten the response time to market changes. Moreover, they provide the SCM with a number of features required by the market:
- Personalization/customization according to the specifics of the business;
- Collaboration – between people, departments and partners;
- Real time working, which leads to the reduction of the internal operations times;, care sa duca la reducerea timpilor de indeplinire a operatiunilor interne;
- Flexibility– faster adaptation to permanent changing conditions in the market to earn or maintain competitive advantages;
- Efficiency of the SCM processes by reducing or eliminating non-value added activities;
- Visibility end-to-end inside and outside the company, upstream and downstream processes of SC;
- Traceability – ability to identify and track a product or a component back to its point of origin during all stages of SC;
- Integration of the information and sharing them to the partner organizations in SC.
The implementation of the SCM systems offered by Senior Software provides access to such features which are essential for the proper functioning of the logistics chain.
Phd George Ogrinja, Supply Chain Director,
Associate Professor, Faculty of Economic Cybernetics, Statistics and Informatics, ASE Bucharest