Posted by Laurus Nobilis on March 31, 2009 under Supply Chain | 
When it comes to discussing supply chain ROI or supply chain return on investment, the usual practice companies undertake is to use three years for its calculation. Aside from that period of three years, there are also a number of major factors to consider. The first ever factor to consider cost savings. It makes absolute sense to include this as one of the major factors since every proprietor would have to find ways and means to garner as much savings as possible, especially in the operations of any business.
It is a must to measure any increase in productivity, since with this increase comes more revenue and profit as well. Thus, it is also recommended to remember the sources of revenue at all times. This way, proprietors can also find ways and means to cut costs, for this can also add to more savings. Also, where there’s cost cutting, there is also immediate ROIs. Aside from these factors, proprietors also have to keep in mind events and activities that can bring about future savings.
One unfortunate fact to keep in mind here is that it is not as easy as it may seem to study a business’s ROI from the supply chain perspective. It is actually a lot more complicated, contrary to popular belief of a lot of businessmen in the professional realm. The very implementation of the supply chain’s structure itself is very difficult already. Thus, it would only be understandable that the whole process of studying the results of any investment made in the supply chain would take time. Many businesses assume that just a period of six months can already bring modest returns of investment. This is not true at all. This is just one of the many unrealistic expectations a lot of people make when it comes to the supply chain. A more realistic period of time to expect modest supply chain ROI is actually a year or even longer. This is all the more reason why it is better to allot a period of three years for a business’s supply chain ROI.
This is not the only realistic expectation that proprietors would have to modify at all. There are so many more expectations, and all would have to be modified and made as realistic as needed. One of these expectations pertains to benefits, and another pertains to the whole duration that the project will be implemented. Also, a practical guide is needed for proper monitoring and measuring of logistic operations. Logistic operations is very much needed to accurately determine just how much the whole project will return after the whole investment. Business applications pertaining to planning, forecasting, and modeling should also be implemented.
Aside from these, it is also important to measure customer relationships, so that businesses can maximize their resources into optimizing these relationships. After all, customers are the lifeline of any existing business. Warehousing, order management, inventory, material management with logistics, manufacturing, and so many more aspects should be measured and monitored closely as well.
All of these are just some of the many aspects and factors to consider for proprietors to effectively study supply chain ROI, so that they can maximize their returns in the long run.
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Posted by Laurus Nobilis on under Supply Chain |
Answering the question of what Supply Chain Management is, is as simple as breaking down the phrase into its component parts. Supplies are those inputs that a company relies upon to produce the product that will ultimately reach its customers. The chain is the group of suppliers that bring those inputs to a company and the process whereby those inputs are integrated into the company. And finally, management is the coordination and organization of all these inputs and their implementation. So put it all together, and Supply Chain Management is the science and art of improving the processes that bring suppliers of raw materials together and move those materials through the company until they reach the endpoint, the customer.
What SCM Involves
If defining the term takes a full paragraph to cover even in its most basic sense, you can imagine how complex the industry surrounding Supply Chain Management truly is. It involves managers who map out the entire process and look for inefficiencies and others who develop and maintain relationships with suppliers to ensure a steady supply of inputs. It involves the actual process of manufacturing or value add in which those inputs become the products that will be sold as well as “logistics” or the process of getting those value added products to customers. And finally it involves dealing with and compensating for supply chain returns, such as defective products. Supply Chain Management covers every aspect of the business from input to output and as such requires an extensive array of tools and strategies to help managers to coordinate and organize a company.
The Dilemma of SCM Software
One of the most innovative and revolutionary tools in use by managers involved in the supply chain is Supply Chain Management Software. While I have outlined five general sections that make up Supply Chain Management, each of these sections is unique to a particular business. As such, no single product has been developed to handle the software needs of a company from start to finish. As a result, when industry insiders talk about Supply Chain Software, they are really talking about a combination of many different programs that, when applied together, help manage the supply chain.
While literally thousands of different products are on the market today, they all fall into one of two broad categories, Supply Chain Planning (SCP) or Supply Chain Execution (SCE) software. Supply Chain Planning software covers those programs which use advanced mathematical algorithms to map out the flow of products through a company and to identify any inefficiencies. The ultimate goal of this type of software is to help reduce faulty products, to speed up the time to market, and to reduce inventory. Supply Chain Execution software is designed to automate different components of the supply chain. For example, Supply Chain Execution Software might update inventory listings in a central directory as soon as inputs are brought in from a supplier or are sold off to the customer.
In this way, SCE software eliminates the costly and time consuming task of tabulating the total current supply so as to know when to place the next order.
The Goals of Supply Chain Management
Ultimately the goal of Supply Chain Management is to bring greater efficiency to a company by reducing errors, maintaining steady inputs, and reducing excess inventories. With the growth of the internet, however, it is transitioning into a means of collaboration between companies. By concentrating their efforts on better communication with suppliers and customers, inefficiencies are ironed out not only within the company but in those surrounding it as well. The internet has made the communication between firms necessary for this to take place possible. Consequently, the hope for Supply Chain Management in the future is not only to create a more efficient and profitable business, but to contribute to a more efficient and profitable global marketplace as well.
Dan Johnson enjoys writing about supply chain management. Visit http://www.scmlowdown.com/ to learn more.
Posted by Laurus Nobilis on March 25, 2009 under Supply Chain |
The majority of KPI dashboards are in fact overloaded with metrics and the key to getting the most out of your SCM intelligence is in choosing the most appropriate metrics that are key to providing decision makers with the necessary information to deliver informed decisions when they need it. Using dashboards that are carrying large numbers of KPI’s does not deliver information to SCM managers so they can make optimal decisions. Focusing on the key metrics that identify the main source of SCM business performance is vital and reducing the number of metrics used allows managers to understand better and far more intuitively what a metric is actually trying to tell them.
“Less is more” or TMI (Too Much Information) are two of the comments that you will hear from SCM experts who truly understand the components of the business supply chain from procurement, processing and through to customer delivery. In the very recent few years, with the introduction of RFID technology that allows tagging of containers, pallets and individual shipment items replete with a mass of raw data on content, models, color, specification, origination and so on , it is extremely tempting to dive in and start thinking that all this data that we are now routinely able to collect and collate can somehow be manipulated to provide SCM managers with even more information that will help them make better and more profitable decisions.
This is a short sighted approach and the reality does not match the theory that all of this information being put in front of an SCM management team is actually going to help them.
Following Pareto’s Principle and focusing on the 20% of metrics that are actually telling you how 80% of SCM business performance is actually being generated does deliver better results.
The issue will become what are you going to use?
Concentrating on the basics will provide a far better SCM dashboard to equip managers to focus on the real drivers of the supply chain process. Remember we are looking to focus on cost reduction, better supplier management, shorter delivery times or better on-time delivery to customers, improving the efficiency of the manufacturing chain and being able to distil this in a format that presents information against pre-set indicators and historical trend data.
That all sounds great but let’s have some specifics!
Aim to present the following and little else on your SCM dashboard:
- Production on Time and Complete
- Supplier Fulfillment on Time and Complete
- Perfect Order Fulfillment
- Perfect Order Lead Time
- Expedited Order Fulfillment
- Customer Return Rate
- Cash to Cash Cycle Time
These are seven KPI’s that will provide your supply chain management team with the information that will provide them with over 80% of the indicators of SC performance. Look to provide more than this and you are heading into information replication and data overload resulting in management delays in exercising decision making power and confusion over what the metrics are actually trying to tell you.
If you are interested in learning more about supply chain metrics, check Sam Miller new web-site.
Posted by Laurus Nobilis on under Supply Chain |
The mere mention of supply chain management, outside of business circles, tends to set eyes rolling. While it may not be of interest to the average lay-person, it is an item of great interest to those in the business community. Supply chain management is a crucial element of good overall business management. Long term viability and corporate profitability are critically dependent upon it. Let’s spend a few minutes exploring the basics of supply chain management.
Supply chain management refers to the process by which raw materials are acquired and used in the manufacturing of a product. It also takes into consideration the delivery of finished goods, and the ability to process returned goods. Ideally, these processes should function as an organic whole. The entire point and purpose of supply chain management is to ensure that products can be produced and delivered in an efficient and profitable manner.
Supply chain management is comprised of five primary elements; plan, source, make, deliver, and return. Each of these topics represents five distinct elements of the production process. The planning stage is the stage in which strategic plans for production are made. This stage is critically important, as it allows a company to develop a strategy for managing their production process flow. Metrics are also established at this time, to ensure that elements of production can be monitored.
The next stage is equally important, as it is an extension of the planning phase. The source phase refers to the early implementation of the strategic plans decided in the previous planning phase. It is during this phase that suppliers of raw materials and components are decided upon. Pricing, delivery, and payment terms are all considered at this time.
Next, we consider the production phase. This is also known as the start of the manufacturing process. Production related activities must all be accounted for at this time. Production, quality control, packaging, and shipping all come into play at this important stage. This stage is also the most intensive, regarding metrics. Production output, worker productivity, and overall product quality must be tracked and monitored closely.
Delivery is the next phase to consider. This area is generally referred to as logistics or shipping. At this stage, systems must be in place to coordinate orders. Orders must be processed, tracked, and delivered. It is also important to establish a payment system at this stage. Other considerations include warehousing, trucking contracts, and customs-related procedures.
One of the most oft overlooked elements of supply chain management is the returns process. Naturally, we would like to believe that the products we produce and ship are flawless. As you know, that is not always the case. Customers are not always satisfied, and systems must be in place to reintegrate returned goods into the production flow. Returned goods should always remain segregated until they can be reviewed and assessed. By adhering to the principles noted above, you can ensure that your company is sustainable and profitable for years to come.
Jim Staller is a firm believer in responsible business management. When he is not busy consulting for some of the most successful companies in America, he writes for http://www.industrial101.com – an indispensable guide to industrial manufacturing and materials, with information about enterprise resource planning, industrial equipment and more.
