Supply chain management (SCM) refers to the way enterprises plan, monitor, and control the flow of materials related to their products and services. For those looking to get ahead in a tough global environment, SCM is critical. High-impact technology, supply chain management solutions have the power to increase flexibility, productivity, and profitability—and future-proof your organization.
What is Supply Chain Management?
Supply chain management sounds elaborate, but really it just refers to a way to keep track of all the different parts of making and selling products. It helps businesses ensure they have the right quantity of the right product -- delivered at the right time and to the right place.
Supply chain management is important because it can help businesses save money and improve efficiency. It can also help businesses to swiftly respond to changes in the market.
The supply chain is a large network of producers and stakeholders: suppliers, manufacturers, distributors, retailers, and end customers.
Supply chain management involves a tremendous amount of resources for demand planning and continually auditing and improving all processes.
The ultimate goal is to have the most optimized supply chain process possible, meeting customer demand, maximizing speed and efficiency, and reducing your business costs.
What is Industry 4.0?
Industry 4.0 is a common buzzword these days. Industry 4.0 means the fourth industrial Revolution.
The first three Industrial Revolutions centered around mechanization, assembly line automation, and then the advent of computers and robotics.
The fourth wave is Industry 4.0 or, or "the Internet of Things" (IoT), and refers to a network of physical objects connected through software and connectivity technology.
Some examples of IoT technology include:
- Smart thermostats: adjust to room temperature automatically based on weather or whether there's someone physically in the room.
- Smart speakers or home assistants like Alexa or Echo: add items to your grocery list, give you weather reports and traffic updates, play music and complete other tasks.
- Smart door locks: door locks that can be opened or closed using your smartphone or biometric technology.
- Smart appliances: like refrigerators that know when you're running low on an ingredient or that the milk is spoiled.
These are just a few of the most commonly known examples of IoT in action. IoT is becoming pervasive in healthcare (i.e., heart monitors), data collection, connected cities, and even cloud-connected shipping for manufacturers and distributors.
Supply Chain Management and Industry 4.0 Working Together
IoT technology, interchangeable with Industry 4.0 technology, is making supply chain management smarter and more nimble than ever.
IoT technology can improve the supply chain management system by providing real-time updates and information about the location, quantity, and condition of goods. This data empowers supply chain professionals to track goods at any phase in the organization's supply chain, identify potential problems, and make optimizations, updates, and revise timelines as needed.
As an example, if an order shipment is delayed, IoT sensors can alert the appropriate stakeholders. This can help prevent or mitigate further delays, so negative downstream impacts do not ripple further down the supply chain.
IoT technology can also be used to monitor the condition of goods (i.e., temperature and storage environment) to ensure the products arrive in operational condition when they arrive at their final destination.
IoT technology can also be used to monitor the condition of goods. This can help to ensure that goods are not damaged in transit and that they arrive at their destination in good condition.
SCM In the Cloud
Supply chain management software can run on-premises or in the cloud, but cloud computing is a more natural fit. When disruptions occur along your supply chain, you want to be able to flex without having to make major changes to your code and applications. A cloud environment allows you to operate SCM in an agile manner, so you can respond to unexpected issues efficiently.
In general, the cloud is ideal for SCM because it's tough to make any key Industry 4.0 upgrades with solely on-premises enterprise resource planning (ERP) software.
For instance, many senior leaders rely on dashboards to alert them to critical issues in real-time. This functionality is most effective when pulling and analyzing data from every area of the business, not just one department.
In a time of continued global uncertainty, all your applications, from IoT sensors to AI analytics to SCM systems, operate best when deployed in a dynamic cloud environment.
Using the latest technology to get ahead is one reason why 90% of businesses that Epicor surveyed are planning to move to the cloud this year. But one thing a good SCM application does is allow you to move to the cloud at your own pace, according to your business needs. Ultimately, SCM in the cloud is the optimal environment. But it should be flexible enough so that you can configure it on your terms and test out the benefits as you go.
Benefits of SCM
Supply chain management is such an integral part of manufacturing and distribution that it can affect multiple areas of your business. Here are some of the key benefits of SCM, ones that can power advanced technology to help you build a better, more profitable business.
Quick Responses to Inventory Disruptions
One common—and frustrating—challenge manufacturers and distributors face is delays and cancellations. When shipments never arrive, production plans change or get put on hold. Either result is a loss that can ripple throughout the enterprise.
These disruptions are far too complex for employees to track and resolve using spreadsheets. With SCM, you can see disruptions coming and adapt to them quickly. By identifying the original source, you can get the information you need to make quick adjustments.
Better Collaboration with Suppliers
SCM software helps your business collaborate more efficiently with suppliers by providing a platform for continual communication and engagement. Your shared platform can be used to exchange data, track progress, and identify, offset, and/or solve any issues.
This software can also ensure all parties are on the same page, literally, when it comes to purchase orders, invoices, and shipping updates.
Overall, SCM software helps you save money, gain efficiency, and improve customer service.
Better Quality Control
Your business will achieve better quality control utilizing SCM, as the software offers a way to track and monitor the quality of products throughout the entire supply chain. This means you can identify potential issues right away and take corrective action early before any major defects.
SCM can also be used to monitor customer feedback. Tracking and analyzing complaints can help you identify trends or general areas where quality control needs more oversight.
Shipping Optimization
SCM can optimize your shipping, helping your business:
- Choose the best shipping method for each order.
- Negotiate the best rates with different carriers.
- Track and provide real-time shipping updates.
- Manage accounts receivable (AR) and accounts payable (AP).
Overall, SCM will help businesses improve the efficiency and speed of their shipping operations leading to happier customers and greater business cost savings.
Reduced Overhead Costs
As touched on throughout the post, SCM can help businesses reduce costs in major ways. SCM software allows your business to automate tasks, optimize inventory levels, reduce transportation and carrier costs, and improve efficiency in every aspect of the supply chain process.
Risk Mitigation
SCM software can help your business with risk mitigation. SCM lets your business quickly pinpoint potential risks, assess the probability and business impact of potential risks, develop plans to reduce or mitigate risks and offer continual monitoring (with updates) on your risk mitigation plans.
Risk mitigation is crucial to minimizing supply chain disruptions and protecting your company's reputation and bottom line.
Stronger Cash Flow
SCM software can help your bottom line and your cash flow.
The right SCM software can help with managing inventory, so you can avoid keeping too much stock on hand and tying up your cash.
SCM can also help you: reduce the amount of time it takes to get your product to market, negotiate better terms with your suppliers, and streamline your management of AR and AP processes.
With increased cash flow and a more efficient supply chain, you have more liquid assets on hand to invest further in your business or pay down any debts.
Greater Business Agility
SCM software can improve business agility by making it quicker and easier to respond to changes in supply, demand, or other market conditions.
For example, SCM can help forecast an increase in demand for products and enable your business to quickly ramp up production. SCM can also help you swiftly find a new shipping carrier or supplier in the event of any disruptions or slowdowns.
Better BI Insights and Data Visualization
SCM can give better business intelligence (BI) insights and improved data visualization. SCM is one system that is collecting and analyzing data from across multiple sources, including suppliers and customers. SCM can then use this data to easily create reports, dashboards, and views that give you meaningful insights into your supply chain.
This may include charts, graphs, pictographs, and heat maps that give you enhanced supply chain visibility so it's easier to: present and interpret data, draw conclusions, and find actionable solutions.
What About Labor Shortage?
The labor shortage isn't showing signs of letting up, but supply chain management systems can help in three main ways.
3 Ways to Navigate the Labor Shortage
- SCM can minimize confusion along your supply chain, while increasing automation, delivering better supply chain analytics, and decreasing the need for manual processes. This improved efficiency can lead to more productivity, ultimately allowing you to do more work with fewer people, which can be valuable if you're feeling the labor crunch.
- SCM can enable a more flexible workplace, especially when deployed in the cloud. Giving end users the ability to manage operations remotely can be a win-win: It can make your workers more productive while boosting their satisfaction.
- SCM can help you attract and retain talent, particularly younger workers. When millennials and Gen Zers join a company, they expect cutting-edge digital tools. Accustomed to a life of smartphones and computers, they're comfortable with various applications, interfaces, devices, and machines. Empower them with low-code/no-code tools, and they're apt to design quick solutions to everyday problems.
A Foundation For Your Connected Organization
In an Industry 4.0 context, supply chain management systems can be considered the digital linchpin of the connected organization of the future. A production plant can't operate without the right supplies. SCM mitigates the risk of that happening, which makes your supply chain more resilient.
To get the most value out of SCM, it should be integrated with your entire ecosystem, such as sales management, product management, production management, and customer relationship management (CRM).
The power to link raw materials to product shipment and customer satisfaction—and to analyze all the analytics for real intelligence—is extraordinary. But it can only happen when all information is available to the right people at the right times.
7 Critical SCM Capabilities
The best supply chain management brings multiple high-impact capabilities to your manufacturing and distribution enterprise, providing powerful end-to-end solutions. These are not the only SCM capabilities, but some of the most critical and relevant ones.
Purchase Management
Communicating and collaborating with your suppliers should be straightforward—especially when you have a lot of them. Purchase management automates manual tasks, helping you streamline purchase order writing, improving order accuracy, and reducing inventory.
Demand Management
Demand contracts can help your business, but only if they're managed well. SCM's demand management uses statistical forecasting and planning tools to give you insights to improve fill rates and enhance your customer experience in the short and long term.
Inventory Management
Supply chains are all about managing the flow of materials, from purchase order through manufacturing and shipping—and inventory management helps ensure they don't get held up. In a global environment, real-time data and analysis tools like shortage monitoring, reorder analysis, and stock status are critical for success.
Warehouse Management
Industry 4.0 is all about connectivity, and SCM seamlessly links your warehouse with order processing and manufacturing operations. Once you can automate your pick, pack, ship, and receiving processes, you can compete on speed by offering rapid fulfillment.
Advanced Material Management
A foundational capability of supply chain management, advanced material management gives you the power to use a mobile device and barcoding technology to easily monitor raw materials in real-time, throughout your entire enterprise.
Supplier Relationship Management
Redundant data entry wastes time. Supplier relationship management capabilities eliminate the need to do it by centralizing records for buyers, parts, and suppliers, and give you automated tools to quickly convert supplier responses into actionable purchase orders.
Supplier Portals and EDI
As many global supply chains adopt electronic connections, your ability to respond may center around traditional methods of electronic communication, such as Electronic Data Interchange (EDI). The sharing of electronic documents with trading partners and leveraging Supplier Portals to share and collaborate provide greater visibility of supply chain activities—giving you the needed tools to predict failure.
Accelerating into the Future of Supply Chain Management
The days of quarterly meetings to get an update on your logistics and supply chain management strategy have long since passed. In the accelerating digital universe, a global supply chain makes managing it a minute-by-minute business need.
In the future, as technology becomes faster and smarter, SCM will continue to evolve to capture and analyze more information in greater detail. More processes will become automated, creating new opportunities for companies that can best build a connected organization. Manufacturers and distributors looking to stay ahead of the competition will be at the forefront of these changes.
Learn more about Epicor supply chain management solutions for your business so you can meet 21st customer expectations and manage your supply chain in the nimblest, most efficient way possible.
