Supply Chain Management Framework
The supply chain framework is based on a functional model of the SCM system. This basic framework is a development tool that assists in the development of a well integrated SCM system in an organization. The framework consists of several components that define key functions, processes and best practices. There are a few organizational behaviors known as SCM enablers that support the organization's overall performance. First, we will look at the seven SCM components.
The Seven SCM Components
The SCM components represent business processes and practices. They incorporate all the activities that are necessary for maintaining and developing relationships with suppliers, keeping the organization's marketing and financial objectives in focus. The seven SCM components are described below.
SCM leadership
SCM leadership component provides SCM system direction, designs and assists in deployment and improvement of the SCM system.
Managers form different functional domains that interact with the supply chain constitute the leadership component. These functions include materials, purchasing, quality, manufacturing operations, manufacturing engineering, design engineering and marketing. Overall performance of the SCM system is to a large extent dependent on the interaction between these functional heads and the senior management.
SCM strategy
A firm's SCM strategy component focuses on how different entities of the supply chain perform as a group. The firm's resources are allocated to different supply chain operations and these resources are aligned with the firm's strategies. The SCM strategy forms a blueprint for supply chain operations that support and are consistent with the manufacturing and marketing objectives of the organization. This strategy should be a part of corporate strategy and the various functions should also be involved in it.
Operational planning
The operational planning component defines the operational requirements for maintaining a supply chain. These requirements are specified in terms of tasks, resource requirements and measurements. The functions listed in operational planning include commodity planning, supplier capacity planning, planning for supplier evaluation, certification processes, etc. Successful operations plans use inputs from company's overall strategy and SCM strategy.
Business relationship management
Organizations are dependent on the supply chain partners as much as these partners are dependent on them. Thus, it is important to have an environment conducive to communication and negotiation between the organization and its supply chain partners. The nature of the communication varies depending on the organization's relationship with its key suppliers. Organizations normally share operational, financial and marketing information with their supply chain partners. In this way, trust develops between them. As a result of open communication, suppliers are better aware of the operational requirements of the organization. The relationship can be improved by having long-term contracts, and using inputs from different levels of management and supply chain partners in the communication and decision-making processes. Exhibit 16.2 describes how supply chain integration can bring mutual benefits to all the supply chain partners.
Order-to-delivery process
The order-to-delivery process defines how effectively an organization can direct the flow of products from suppliers to the company.
It includes certain processes such as order releases, receiving, inspection of incoming material, accounts payable, and materials handling. By automating and simplifying the order-to-delivery process, organizations can reduce order time significantly. The order-to-delivery process can be used to evaluate suppliers' performance on the basis of criteria like on-time delivery, cost, defects, lead time, flexibility in scheduled time, etc.
Quality and performance management
The quality and performance component is concerned with the initiatives that organizations and suppliers take towards improving, and maintaining quality standards. The quality and performance component helps identify the quality defects in suppliers' products, and facilitates cooperation between suppliers and the manufacturer to improve the quality of the items supplied. By working together with suppliers with regard to improvement in quality of the products, reduction in cost and cycle time, organizations can improve the overall quality and performance of supplied material.
Exhibit
Supply Chain Integration
Through supply chain integration, companies can realize higher profits, increase market share, improve competitive position, etc. Many leading companies such as Dell, Seven-Eleven, Lucent Technologies, Sun Microsystems, Wal-Mart, Procter and Gamble have achieved significant improvement in their competitive position as a result of supply chain integration. As supply chains are dynamic in nature, they continuously align themselves to changing market and customer needs. In such a dynamic environment as integrated supply chain allows for efficient use of information.
Three key issues that define supply chain integration are information integration, coordination and organizational linkage.
Information Integration
Through information integration, supply chain partners can exchange information and knowledge. The information shared includes demand forecasts, inventory status, capacity plans, production schedules, demand forecasts, shipment schedule, etc.
Coordination
Coordination dimension of supply chain integration defines how work can be assigned to the best-positioned supply chain partner. Vendor Managed Inventory (VMI) and Continuous Replenishment Plans (CRP) are such coordination activities wherein the replenishment decision are given to the suppliers. As suppliers are better informed about the product, market condition and forecasting techniques, they will be more effective in handling replenishment plans. Coordination also involves sharing, redeployment and consolidation of resources such as warehouses, inventory, transportation, etc.
Organizational Linkage
Other than information sharing and coordination, integration involves maintaining an effective communication channel between various supply chain partners. Communication can be maintained through EDI (Electronic Data Interchange), Internet, account teams, executive briefing, etc. Organizational linkage also involves setting of performance measures that span the complete supply chain. If the performance of one partner effects the other then the under performing partner is held accountable. In case of joint performance measures, multiple channel partners are held accountable. This common responsibility and accountability promotes coordination and collaboration between different channel partners. Supply chain integration allows easy reassignment of responsibilities based on the changing business environments and customer requirements. Besides the partners can enter or leave the network without affecting the functioning of the supply chain network.
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Human resources management
The human resources component deals with the training of personnel in order to improve their skills, knowledge and attitudes that help enhance the performance of supply chain. Employees should understand the diverse supply chain activities and should be able to perform the activities competently. They should develop multiple skills so that managing cross-functional teams becomes easier and simpler. In order to achieve a broad set of skills, organizations conduct regular training and orientation programs. Training is provided in functional domain knowledge, product development, assessment of suppliers, manufacturing processes, team skills, and supervisory skills.
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