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    Benefit of Supply chain management (SCM)

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    A global demand/supply chain management system.
    THERE has been much talk of late about the new battleground for IT solution providers - supply chain management (SCM) systems. This trend follows hot on the heels of enterprise resource planning (ERP) systems and website design. But what exactly is supply chain management and how do these three concepts inter-relate?
    The concept of supply chain management is not new. In the 70s, academics and logistic managers were starting to discuss the value chain. A concept whereby a raw material gained value as it moved through the production and distribution processes to the consumer.
    Where there is value added, there is inevitably cost too. Logistic managers continued to focus on the cost side of the chain (reducing transportation costs was an easy and highly visible target, ask the shipping Lines).
    SCM however, implies more than simply cost reduction. It is the attempt to marry the value while minimizing the cost elements when looking at the chain from a push or manufacturing point of view.
    One often hears of the demand chain, put very simply, this is consumer or retail oriented version of the same thing.
    SCM has come to the fore in the last two years because of two main factors: the Internet and increased globalization.
    Internet technology allows a level of collaboration between previously loosely affiliated partners in the supply chain, which would have been difficult or prohibitively expensive in the past for all but the biggest producers or retailers.
    Collaboration will be more than just providing more accurate and timely information. It will include collaborating over product designs and production planning.
    Many large retail players who could dominate most of the producers and transport providers sought commitments from their supply chain partners to provide standard or proprietary EDI messages in order to give the retailer or OEM greater visibility of the supply process.
    Though the costs were high to develop FDI messages from the legacy manufacturing, transport management or warehousing systems, the volume of business to the customer often made this worthwhile. The benefits of this approach however did not filter very far into the chain.
    So what has changed? Many medium to large companies have now gone through the pain of implementing their ERP systems and wish to see greater value from them than perhaps they have realised to-date.
    Also, many companies have established websites for marketing or true e- commerce. Whatever the reasons, the acceptance and pervasiveness of the web are now high among white collar workers while access costs are reasonably low. The browser battles are consigned to propeller head history (we hope).
    This all means that systems which take advantage of the ubiquitous and cheap (IE or Netscape browsers) interfaces can be deployed quickly and intuitively.
    Contrast this to the pain of ERP or legacy system implementations and you soon get to realize just why there is so much interest among senior operations managers.
    Interfacing one's EPP system (manufacturing, warehouse management, transport management, accounting, retail, etc) to a third party SCM system has never been easier, thanks to new standards in messaging (XML), excellent Enterprise application tools (EAT) and the continued growth in EAT standards.
    The web is clearly not the end. New user interfaces are developing all the time.
    The wireless application protocol will undoubtedly increase the awareness of velocity in the supply chain and increase consumer demands for products and services while "backward" integration to e- mail is also likely.
    As a result of such recent technical advances, it is no longer just the larger retailers who have the supply chain leverage. There is a general shift in power from the manufacturers to retailers and consumers. Traditional retail margins of 2 to 3 per cent can be increased or used for competitive price advantage where costs are lower, while the manufacturer's margins, typically 15 to 25 per cent are slowly being eroded.
    Globalization has accelerated both as a result of Internet technology and the emergence of new markets following dramatic political and fiscal changes in the last fifteen years.
    Business to consumer (B2C) portals, auction sites and store fronts are allowing consumers all over the world to purchase goods they may not normally have had access to at prices that undermine local traditional competition.
    The back-end delivery from such systems has put a heavy strain on the existing global freight infrastructure.
    Since delivery is everything for any consumer, it is assuming greater importance for the web-hosted B2C sites. B2B on the other hand is just another form of relationship where there is an implied onward link to a consumer or other business partner.
    Whichever way you look, getting goods and raw materials from one party to another as efficiently as possible, preferably to an agreed schedule, with high visibility of what is going right and what is not is the new key area.
    Enter SCE - this acronym describes systems which are looking at the execution of processes in the supply chain.
    Some of the key benefits and competitive advantages which SCM implementers hope to achieve from using Internet and intranet-based systems are as follows: reduced inventory costs; reduced cycle times; improved planning; improved collaboration and working relationships with customers and suppliers, reduced transport costs, increased revenues through adding greater value; protecting and extending existing markets; opening new markets.
    AMR Research forecasts the Asia-Pacific market for sell-side e- commerce software will grow at a feverish pace. Asia's compound annual growth rate for revenue will be 106 per cent per year generating US$2.9 billion (US$1 = RM3.80) in sell-side e-commerce revenue by 2004 for a worldwide market share of 18 per cent.
    E-commerce will grow even faster in Asia than it grew in the US because of the availability of applications. Also foreign companies will be able to leap frog US companies by buying rather than building their own e- commerce software.
    The most outstanding challenge is the globalization problem. According to Meta Group (www.metagroup.com), "the globalization of the manufacturing sector has not yet run out of steam, and the trend towards sourcing a product from a single regional factory continues. But the innovative edge is expected to pass to the retailers as they expand internationally".
    "With both manufacturers and retailers now operating increasingly on a global basis, distribution networks will become more complex and require much tighter management."
    Also the following is often quoted, "competition between e- commerce operations is less about product features and benefits than it is about the creation of new business models and new economic relationships".
    One local supplier of SCE - Qiva Sdn Bhd - positions its product, IQuator, as the infomediary layer in the accompanying illustration.
    The global supply chain still faces many challenges, not least of which are: larger numbers of buyer and supplier collaboration; diverse cultures and languages; legal and regulatory differences; localization, technology and infrastructure. The e-business solutions pie for supply chain applications is however significant.
    Finally, why all the fuss? One analyst group has estimated that its worth will increase from US$1.8 billion in 1999 to US$23 billion by 2004. This would seem a big enough cake to fuss over.

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    Supply chain management (SCM) aims at not only minimizing costs but also helps in adding value to total manufacturing process. It has been in limelight now days due to globalization and rise of ecommerce. Thus with the Internet and the other new wireless technologies fast becoming a vital component of the ...

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    This discusses the Benefit of Supply chain management (SCM)