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SCM is used as a means to integrate planning, purchasing, manufacturing, distribution, and marketing organizations that normally do not work together to achieve a common goal. Each works toward goals specific to their own organization that accomplish narrow objectives. SCM is a way of integrating these varying functions so that they work together to maximize the benefits for all involved.
There are three levels of SCM: strategic, tactical, and operational.
Strategic SCM deals with future planning than in looking at market evaluation, capacity issues, new products, and technology changes. This planning is addressing issues that may be factors several years out. This is accomplished at the executive management level.
Tactical SCM involves a shorter planning cycle. It is more concerned demand planning, inventory planning, and supply planning. This is determined at a less senior level than Strategic SCM.
Operational SCM is current planning activities measured in at most weeks. Operational SCM involves the majority of the operations. It includes demand fulfillment, scheduling, production, transport, and monitoring.
There are many decisions that are made when looking at SCM. They follow the above categories. Strategic decisions are made over longer periods of time and linked to a corporation’s strategy. Operational decisions are more short term and look at day to day activities. Four major decisions are considered. The include decisions on location, production, inventory, and transportation. A geographically strategic placement of the production facilities is key to creating a successful supply chain. Decisions on what products to be produced have to be made wisely and strategically. Also, where these products (which locations) will be manufactured is very important to SCM. Inventory decisions and management is critical. Some inventories are necessary to hedge against uncertainty, but this comes with a cost. Managing these inventories efficiently will be of benefit to the corporation. Transportation decisions include cost versus benefit. Air transportation is costly, but fast and reliable. Other modes of transportation may be cheaper, but the sacrifice is having to hold inventories due to delays that may occur. If the above decisions are made with careful and strategic thought as well as with concern for integration, the supply chain should be efficient and successful.
The overall goal of SCM is to optimize supply chains in an attempt to provide more accurate and time sensitive information that can be used to improve process times and cut costs. Supply chains have been around for decades and a constantly being improved. The newest opportunity for improvement is the introduction of radio frequency identification (RFID) tags. RFID technology will provide real-time information that will allow manufacturers to get better readings of customers and markets thus further improving supply chains. RFID will help retailers provide the right products at the right places at the right times. Ultimately, maximizing sales and profits
Wal-Mart has been leading the charge with RFID technology. Having the largest retailer adopt and begin to use RFID technology has given strong backing to the technology and will only further and quicken the expansion of RFID. They have begun requiring all their major suppliers to implement RFID technology on all products supplied to Wal-Mart.
One example of what Wal-Mart has done with SCM and its suppliers is that of its relationship with Proctor & Gamble. These two built a software system that hooked Proctor & Gamble up to Wal-Mart’s distribution centers. This system would then monitor supply levels and when products run low, automatic alerts are sent out to require the shipment of more products to that distribution center. Wal-Mart has taken this as far as going to the individual store locations. The shelves are monitored in real time via satellite links that send inventory messages whenever Proctor & Gamble products are scanned at a register. This allows Proctor & Gamble to be fully aware of up to the minute product inventories at the actual store locations and ship additional products as necessary. This concept is a huge step in making SCM as efficient as it can be.