The Supply chain management (SCM) is a kind ofmulti-functional management approachwhich focusing on themanaging the flow of goods. It includes the movement and storage of the raw materials,the managing of the inventory, refers to the stock item availability and condition and also the managing the flow of the finished product, from the pointout of the organization and toward the end consumer. In the supply chain, the networks, channelsthat in connected to each other and also the node businesses are involved in the provisionof products and customer requiring services.
According to the Dictionaryof The Association for Operations Management,the management of supply chain management refers to the “design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally”.(APICS, 2003)
Nowadays, more organizations understand the fact they are facing is that, in order to improve their level of maneuvering with the objective of being more ﬂexible and responsive to meet the changes in the market requirements, they need to reduce owning the raw materials sources of themselves and their own distribution channels and buildup an effective supply chains, or some relevant network(Baziotopoulos, 2005). This fact and the decision made by the companycauses them increasingly being outsourced to other firms and as a result, the company perform the activities better and having a higher efficiency. Because ofincreasing the number of companies involved in satisfying customer’sneeds, with putting less resources to manage daily logistics. They find that this kind of systems need fewer control in management and more supply chain partners involved, and this being the beginning of the concept inthe supply chain management.Also, this kind of management purpose to improve trust and collaboration among chain members, in order to improve inventory visibility and the velocity of inventory movement (Lewis &Talalayevsky, 1997, Gunasekaran, 2004).
By the definition, we can see that the SCM draws heavily from the varies areas, such as the operations management, logistics of product, raw material etc…, the procurement of related items, and the information technology, and being a more integrated approach . From this we can see that the SCM is not only relying on managing the physical movement of the product, but managing the information, to facilitate the effectiveness in the supply chain management.
Information technology in supply chain development
By theevolution of supply chain management studies, we can get the evidence that the supply chain management is not only managing physical movement of goods, butmore relying on the management of the information. In the supply chain management studies, we can find that theymostly intensified with the developmentof information and communicationtechnologies (ICT), that show us the SCM rely on the managing and sharingand one of the example is the development of electronic data interchange (EDI) systems, after that the enterprise resource planning (ERP) systems also be developed through the 1990s one of them is the well know corporation management software, Oracle business suites.
The Internet and World Widecomplexity of the systems is continuing the development into the 21st century with the Internet-based collaborative systems. (Gunasekaran&Ngai, 2004)This shows that the implication of information technology makes the management of supply chain focusing on the management of resources planning and the information sharing, not only on the logistic operation. As they know that only management the flow of product is not far enough for a success supply chain management, as the supply chain is not only consist of the product flow, but also to design, to plan and to execute.
The supply chain management emphasizes on theoverall and also long-term benefit of all stakeholders on thechain through co-operation and informationsharing andthis shows the significant importance of communication systemand the application of Information technology in SCM. This significant importance is caused by the variability of ordering (Yu et al.,2001). The increase of information sharingbetween members in the same supply chain by using EDI or the relevant technology can have an outcome of reducing uncertainty and enhance shipmentperformance of the suppliers; therefore, it can greatlyimprove the performance of the supply chain system(Srinivasan et al., 1994).
In 1996, Armstrong and Hagel proposed that there isbeginning of an evolution in supply chain towardsonline business communities. They bring out an example that, the GeneralElectric’s trading process network, which is a kind of onlinebusiness community and that communitymakes the company to have a large amount of transaction with about $1 billion dollar of businesswith their suppliers located all over the world. In the US, thelargest three automatic makers also have the similar connection system. They are launching the automotive network exchange(ANX) in order to understand the favorable outcome of electronic business communities. The ANX establishanuniform ways for their parts suppliers tocommunicate with each other and obtain order informationfrom the automatic manufacturers (Graham andHardaker, 2000). This further shows that, the organizations in the supply chain heavily rely on the communication system, via the EDI, ANX or other relevant communication systems to sharing the data to connect each others to maintain a successful supply chain management but not leading a success by managing physical movement of goods.
Case Studies – Coca Cola Enterprise
Coca cola, the well-known beverage maker, they are one of the world’s most powerful brands, its product have been dominated the global market ofsoft drink for more than a century. According to the Inter-brand’s latest global rankings,count to 2011, the Coca cola soft drink has been the top beverage in the world for consequently 12 years.
But, same as other company that related to the consumer product, especially as a fast moving consumer goods (FMCG) Company. As focusing on having a stable and substantial development of business, CCE facing similar challenges on the problems of manufacturing and logistics businesses with other company that the difficulty in incompatible in the varies management system in the same company, in order have ability to have a widely forecasts and also to simplify the operation process,all they need is to replace the old, outdated management systems with an up-to-dated platform.
As using different kinds of software in the company, the executives of the Coca Cola Enterprise recognized that the information sharing and executive system in all their business units need to be centralize, by establishing a centralizeddata sharing program and apply across all of its business unit will generate a favourable outcome in expanding the market sharing, they found that, in order to reduce the difficulty at apply those marketing practice in place and can be operated in a short time when the corporation acquire and integrate new territories into the business, having a set of consistent standard system and processes is a must.(Sapardanis, 2012)
For the Europe region of the Coca cola enterprise, they launched their“Genesys” program.They plan to deploy a brand new supply chain management system to all 17 plants inthe European countries. The new supply chain management system would replace many former CCE’s supply chain processes and make the production process more automatically. Also they required new skill sets in the process to ensure the required speed of deployment.
By the usage of the new SCM system, the SAP EnterpriseResource Planning (ERP) system, an “all-in-one” software that canlet the company integrate the key business functions in a same system in order to reduce the time costing on the compatibility problems. It consists of vary kinds of modules, such as the utilities for marketing and sales, the field service, design and development of the products, control of the inventory and the production process, and also themanagement of human resources(HRM) and the finance and accountinginformation(F&A). SAP ERPcollects and combines the data from the separate modules which input by difference department to provide the company or organization with enterprise resource planning information to facilitate the decision makers to take their moves. (Monk& Wagner, 2006)
The SAP ERP system include multiple functions, such as order processing, manufacturing, financial transactions, human resources, procurement and other related processes. Also, the SAP Enterprise Resource Planning (ERP) solution used by Coca Cola will replace their old legacy systems in the Account Receivable or Account Payable processes such as the orders, the payment receive or the payment needs to pay. This will allowthem to have a shorter cycle time in those financial processes and increase the productivity. It will also help the executives to bring more clear visibility into the business and improving the quality of decision making.(Rennison, 2012)
As a company focus on the consumer products, and a company that need to focus the company and customer relationship,Coca Cola needs to centralize the information system in the manufacturing plants and facilitate the stock availability in the outlet. Through the new ERP system use by the CCE,they are easilyconnecting those two ends of the business units together: The manufacturing side, which focus on the supply of our product by using raw materials, and the other end shelf-replenishment side, which focus on the demand part of our product and the customer.
For the case of Coca Cola Enterprise, as we can see that, the usage of SAP ERP a kind of success and it have been shorten their operation cycle, by the information sharing system, the productivity is enhanced, and in the case we can see that the success supply chain management is not only rely on logistic but also on the information control
Using a good ERP system, the enterprise can increase efficiency in business process, as it allows the company to have a easier global integration of informationsuch as elimination of barriers of currency exchange rates, language, and culture differences can be bridged automatically, thus increase the transparency of the company, also the information just need to update only once and it can apply to all business unit by the unity system. And this information system canprovide real-time information to all business, which canpreventthe redundancy errors and increase the efficiency and accuracy of decision making.(Monk& Wagner, 2006)
As the aim of the supply chain management is that, using effective information system or relevant mechanism, providing the product to the customer from a raw material form to a complete form in a non-break process, and the product providing to the customer need to be in the right time, right place and with the quality and quantity that being satisfied by the customer. We can see that the importance of a well-developed ERP program, the characteristic of the ERP, the onetime update, real time sharing can reduce the time lag on the supply chain management that the management of physical goods that cannot carry out.
By using the Porter five forces analysis, we can see that the ERP system in SCM seek to address some of the problem. In the category of bargaining power of suppliers, Supplier concentration to firmconcentration is low, as the drop out of own raw material resources and the rely on raw material suppler, they can immediately request for the raw material when they are run out of stock by the integrated system, as the they are not supplying the resources by their self, in case of the supplier that increase the cost of the raw material or the raw material supplier cannot ensure the stability of material supplying, the decision maker can be notice and make the changes of plan in a short period of time due to that aid the real time characteristic of the ERP system. But there still have some challenge, as in a supply chain, vendor and buyertied into a relationship by contract that can hold a company to the vendor until the supply contract expires and it can be unprofitable to switch vendors ifswitching costs are too high, thus they make them have a low flexibility.
By the Intensity of competitive rivalry, as the use if new information sharing system, this kind of innovation in organization management technology can increase the productivity and lower the time cost in the operational process ,thus it can make the organization have a sustainable competitive advantage , due the ERP system, the unity with F&A, HRM, Sales Orders, and Import and export functions in the same system, thus increase the degree of transparency, therefore, they can widen the view of the decision maker and make them make out decision with is suit for the organization and promote sustainable development.
As well as using PoliticalEconomicSocialTechnological (PEST) analysis, We can see that, the SCM system having the characteristic of highly automatic, unity, that can favorable for the organization to solve the problem that the time lag of information and increase the transparency, increase the capability of the system that the different business unit previously, increase the competiveness of the organization.
Although there can increase the competiveness of the organization by using the SCM system, the implementation and training costs of using this system are high. Many companies experience the problems that when implementing the new SCM software, they failing to specify their operation objectives, also cannot deal organizational differences and failing to plan the change to the new system properly. All these factors can mean the difference between having a successful implementation of SAP ERP or an unsuccessful one. Thus waste the resources and get nothing but a bundle of troubles.(Monk& Wagner, 2006)
As we can see that, that success of supply chain must be have the present of the well developed SCM system, no matter the EDI, the ERP or Oracle, the can provide a fast, accurate information for the colleagues and the decision makers to carry out operation or plan out the decision in a immediate response, with the aid of those system, the problem of the deficit communication, such as data outdated, time lag will be reduce or even eliminated. As a result, it can centralize the organization information, increase the productivity and also reduce the time cost and the opportunity of getting error.
The management physical movement of goods is just in a part of the supply chain management, further more the supply chain also need to connecting upward, the raw material supplier ) with the status of the supply of raw material, the horizontal, the stock, financial and the production and also downward (outlet or customer) which the refill stock in the outlet or the delivery, in conclude, the supply chain management is focus on the management of the information the material, stock, delivery, the financial , legal & etc…, but not only the physical movement of goods.
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