AN EXECUTIVE'S GUIDE TO SUPPLY CHAIN MANAGEMENT SOFTWARE SYSTEMS
(1990s) Hewlett Packard cut DeskJet printer supply cost by 25% with inventory modeling software.
(1990s) Campbell Soups reduced retail inventories by 66% while increasing fill rates using forecasting and inventory management software.
The alignment of supply chain strategy and supply chain management software combine to deliver a synergistic performance effect which includes the sustained competitive advantages of increased revenues, decreased costs and reduced risk. Several of the most touted benefits are cited below.
A significant payoff that organizations realize from their investment in SCM software is the powerful gain in competitive advantage. There are material opportunities for sustained cost reductions in procurement, processing and carry costs. Also, the same organizations are reducing their working capital and generating higher sales.
LOWER COST OF DOING BUSINESS
Wal-Mart consistently has the lowest prices, yet they have higher margins than the other discount retailers. Not only do they drive their cost down with supply chain efficiencies, they also work with their trading partners to drive down their cost. The suppliers may then pass on lower prices to Wal-Mart.
One of the biggest savings in transportation and labor is the use of Regional Distribution Centers (RDC) and WMS software. The savings in transportation comes from virtually eliminating less than truck load (LTL) shipments. Corresponding labor savings is the result of automating and consolidating receiving and value added services at the RDC.
Another big savings comes from off shore manufacturing. TMS software helps manage the many different legs and modes of transportation, and provides visibility to in-transit goods. Other procurement savings are taking control of and optimizing transportation cost, and collaborating with suppliers in ways to help reduce cost.
Because of the tremendous volume that can be processed each day, WMS is a standard in organizations. What used to be labor intensive activities are being automated using auto-identification (barcode and RFID), electronic data exchange (EDI) and automated material handling equipment. The results are reduced processing cost and greater inventory and data accuracy. Better inventory planning and distribution strategies help to reduce inventory handling.
SCM planning is reducing the need for large inventory buffers, thus reducing storage cost, obsolete inventory, and the cost of capital tied up in inventory.
REDUCE WORKING CAPITAL
Because of SCM planning, more efficient processes, lower lead times and greater accuracy, inventory levels can be significantly lowered. Lower inventory levels means less working capital tied up in inventory.
Cash to Cash Time
By decreasing supplier and customer lead times, the cash-to-cash cycle times are shorter, resulting in lower working capital requirements.
With the use of software and market research, customer values can be evaluated and better understood. This allows for better alignment of SCM with the values of the more profitable customers.
Higher Service Levels
By definition, higher service levels (the inverse is lost sales due to an out of stock condition) means higher sales and more consistently meeting customer needs, thereby increasing the likelihood of repeat business. Modern day SCM planning software facilitates higher service levels without increasing inventory levels.
Globalization presents many transportation risks including delays due to differences in social norms, local politics, infrastructure, and government regulations. SCM systems need planning and tracking capabilities for multimodal, multi-leg shipments, with the ability to coordinate logistics with off shore brokers, SCM partners and 3PLs.
Supply Chain Risks
Modern day SCM Systems provide organizations with planning and management tools to minimize many of the supply chain risks, such as long lead times, inventory shrinkage and obsolete inventory. For example, TMS provides for transportation planning and tracking of goods, increasing the reliability of meeting schedules. The collaboration of demand and supply management improves the overall quality of inventory, reducing the chances of writing off obsolete inventory.
Modern Supply Chain Management software systems provide the features and capabilities to adhere to and comply with industry standards, trading partner agreements and governmental regulations. Other compliance features are tracking lot and serial numbers, maintaining the genealogy of parts and documenting the presence of goods with hazardous materials. A sample of some of the industry standards which promote compliance include EDI data exchange, UPC, UCC, EPC auto-identification standards and VICS Standards.
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