What is Supply Chain Management?

Supply chain management is a relatively recent term that has come into circulation. This concept is voluminous and includes definitions previously used, such as ECR (Efficient Customer Response) and DRP (Distribution Resource Planning).

In fact, SCM does not mean a simple definition, but a new company strategy.

The peculiarities of SCM implementation are related to what products the company produces and sells, what policy the company uses when interacting with distributors and end customers, that is, it can be individual in each case.

However, there are 7 main principles of SCM:

  • segment consumers based on the need for services;
  • orient the logistics network towards the client;
  • closely monitor market demand, and make planning based on them;
  • study consumer demand;
  • strategically plan deliveries;
  • develop a supply chain strategy;
  • use methods of attracting (capturing) new distribution channels.

Implementation of SCM in an enterprise requires a number of significant changes in the mentality of the staff from the company – paying more attention to customer data, increasing operational efficiency, etc. However, the changes are not only about this. The company needs technological solutions to enable this transition. The main focus is on creating a unified information space within the company, automating processes and analyzing the information received.

With the help of modern solutions, the company is able to collect, process, store and analyze data on demand, changes in needs, and individual needs of customers. Based on this information, managers can more easily forecast demand, form individual purchasing plans for different suppliers, and organize supply and logistics schemes so as to reduce all physical costs (storage and transportation costs) and intermediary costs (lost profits and unmet demand).

SCM solutions

SCM solutions also provide benefits for vendors and third parties. Thanks to their use by the supplier company, distributors receive a better service, their applications are processed quickly and they are able to control the order formation process.

SCM is often perceived by companies as part of company automation and operational process management (ERP). Therefore, there are a number of solutions in which SCM is integrated as one of the elements. An example of such a solution is Renaissance CS (we will consider this system in more detail below).

At the same time, a number of individual solutions are currently on the market, among which the so-called eSCM solutions occupy a significant place.

Industry players

The mistake of companies is that they often see the distribution channel of goods on the Internet, but at the same time separate it from all other activities of the company. So orders received via the Internet are often not included in the general database, which leads to their delay. In addition, many companies that have several warehouses, for example, in Moscow, cannot connect them with each other, and work out an optimal delivery system that will allow customers to receive an order on time, and companies can reduce the costs spent on unnecessary transport runs and storage of goods in the warehouse. The costs are then included in the cost of goods, which leads to an increase in prices and a decrease in the competitiveness of goods.

Of course, these problems arise not only when working on the Internet, however, when ordering via the Internet, customers expect prompt processing of orders, and instead it turns out that buying in the traditional way would be cheaper and faster.

Network players

As you know, online stores themselves do not have warehouses and work with trade organizations, selling their goods. At the same time, most online stores work not with one, but with a number of suppliers. Now, having received an order, the online store contacts all the warehouses and finds out where the necessary goods are, and then they respond to the client. Couriers go to the warehouse for products only when a number of orders for the products of this supplier have been received. This leads to a delay in the delivery of goods to the client or refusal of delivery, if the goods are not in stock.

With this scheme of work, the number of dissatisfied customers will be quite high, although now the number of orders via the Internet is still relatively small. Given that the number of Internet users is increasing, it can be assumed that in the future the situation will become more critical.

For both of these groups, using SCM solutions would be more than efficient. Industry players would be able to forecast demand, plan in advance the supply of goods (when it comes to working with distributors), regulate the procurement plan, and optimize the storage system in the warehouse.