A civilization surges ahead with intrinsic economic activities, with materials being transferred from one another and from one place to another, creating a cycle of need to fulfilment. Even war hero like Napoleon once remarked, ‘an army marches on its stomach.’ This is true that material demands require supplies to be replenished at the end of consumers. And it constitutes a broad business ecosystem of managing supply chain from the producers of raw materials to the manufactures or assemblers, and then to distributors and finally to end-users. The entire chain enables movement of goods and flow of underlying information from upstream to downstream, and then streaming of finance and feedback in the opposite direction.
The Supply Chain Management (SCM) pertains to managing, exchanging, tracking and analyzing data from suppliers of raw materials to manufacturers, and finally, to customers through all intermediary channels of distribution, transport and retailing so as to ensure delivery of products and services in right quantities at right location in time while maintaining requisite service level with optimal costs. It transcends the organizational boundaries in its scope, and pervades the entire ecosystem to be responsible for its effective functioning. At the same time, it also poses challenges due to heterogeneous operational processes and nomenclatures across enterprises even along a single chain.
A typical supply chain involves various enterprises to deliver goods and services successfully. It involves chalking out a well-defined collaboration process between enterprises despite of usual scenarios of having disparate operational processes, cultures, and levels of technology adoption. The actual data and process management within an enterprise and interaction between any two enterprises involve people, called as agents or actors. These actors ensure successful transition of goods and services, manage finances, transfer knowledge and make decisions towards good customer experiences and profits.
Managing a supply chain may not necessitate the implementation of an Information Technology (IT) system. But managing it effectively and to remain competitive in today’s business arena would mandate that. It’s not true that adoption of IT solutions for SCM is an original preference of managers and consultants in recent years. In fact, such choice had started a few decades ago though neither scope nor goal of such solutions was so pervasive in those days. The term gained acceptance in eighties; and its scope and goals got comprehensive treatment in nineties with establishment of different corporate information systems.
The evolution of SCM solutions can be understood by the expanding scope and goals, the parameters that we have just mentioned. In the early stage, scope was restricted to Material Requirement Planning (MRP) whereas the goal remained as data management simply so as to help the managers and decision-makers have control over costs and wasteful effects on inventories and their movements across the chain. Later the scope was widened to incorporate non-inventory resources; and Manufacturing Resource Planning (MRP II) came into existence. The goal of having control over costs and ensuring right service level became ambitious due to incorporation of multitude of parameters and processes into the purview.
The modern SCM solutions came in the nineties with Enterprise Resource Planning (ERP) systems, and are still evolving with the advent of new computing paradigms like cloud computing, business use of RFID, advancement in mobile computing, realization of ubiquitous internet connectivity at reduced cost, proliferation of social web, and emphasis on analytics by using large quantity of business data. Big Data and Business Analytics have become buzzwords as we discuss business management today; and thus the same level of impact has been felt in the domain of SCM like that in any other corporate information system.
But then there is a caveat. Despite significant transformations in the technology landscape, the legacy systems still exist in numbers. These use old technologies, sit on older software and hardware platforms, and manage things that are limited in scope and goals though it may be adequate from the standpoints of stakeholders. The cost of revamp is simply high; and it may not be affordable for the companies that were early adopters of SCM IT. While it may not be a right proposition to overhaul an existing information system, there is a great scope for augmenting the newer systems into the business process to reap benefits.
Taken from a guest lecture on Supply Chain Management delivered by me at XIMB (Bhubaneswar) yesterday.