SCM FAQ

Updated: April 30, 2009

What is SCM (supply-chain management)?

SCM is a broad term for managing the processes involved in delivering supplies to meet a given demand efficiently. This encompasses every part of the manufacturing process, including raw materials, work in process, inventory storage and finished goods. SCM focuses on the entire process of how these goods are produced and transported — from planning where and how they will be purchased, collected or mined; to where they will be assembled or developed; to the inventory that will be kept on hand; and finally, to the distribution channels for final sales.

Is SCM the same thing as SCEM?

SCEM (supply-chain event management) is the process of controlling all of the events that could disrupt a supply chain. SCEM helps companies analyze their risks and make contingency plans to solve potential issues before they arise.

Managing a supply chain requires maintaining control over a broad spectrum of logistics and coordinating with partners that include suppliers, intermediaries, vendors and customers — everyone involved in the process of managing supplies that will eventually be sold to meet the demand of the end customer. An inefficient supply chain can cost companies huge sums of money. If too many materials are purchased, transport time lags, inventory is incorrectly cataloged, or too much or not enough final product is delivered, these inefficiencies will erode the profitability of the resulting products. Using SCEM, a company can identify the risk factors specific to its operations and plan how to make processes more effective and efficient.

What kinds of SCM software are available?

SCM consists of hundreds or even thousands of logistics and tasks, which are different depending on industry, company size and other factors. SCM software is as diverse as the processes it accounts for — large, general products are available, as well as smaller packages that target specific industries or needs.

Most companies need to track their supply of materials, their manufacturing timeline and the distribution of products, as well as where their inventory is along this path. Additionally, these companies need to share large amounts of information with partners and vendors.

What are the difficulties of working with SCM software?

There are two primary difficulties in implementing SCM software.

The first issue is that employees must change their work processes to use the software. Rather than relying on discreet paperwork and systems, employees will need time to adjust to the new system. If it is not intuitive to use or makes their lives more difficult at first, there might be a reluctance among the employees to adopt the new processes. Even if workers welcome the systems, the new procedures present a learning curve, and the transition may slow down operations for a time.

Another difficulty is in the software's forecasting and reporting capability. A new system needs a fair amount of fine-tuning to accurately learn to predict the demand for a product, for example. These numbers will be based around normal fluctuations in needs for supply and demand. If a large, abnormal order is placed early on, it could throw off the system. Forecasters will need to learn to work with the system, using their own knowledge of the business to interpret the initial reports and to configure the software as they go.

Although these issues present initial challenges, an SCM system that has been embraced and customized by its users can make their jobs easier and their workdays more efficient.

What impact does SCM have on customer relationships?

A failure in the supply chain could mean that customers receive the wrong products or receive damaged or defective goods; it can also mean that their deliveries are made too late. With an integrated SCM and CRM software package, call-center agents can better communicate with customers about these problems. They can also provide feedback to the supply-chain side about problems that arise and work together more effectively in real time to resolve these challenges.

How can I implement SCM software systems?

As with most ERP (Enterprise Resource Planning) packages, you have a host of options about how to deploy and maintain an SCM system. You can choose an on-demand, Web-based application hosted by a third party for the easiest and least costly option. Or, you can choose to host a solution on your company's own servers by hiring consultants with expertise or using your own staff's skills and time.

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