Logistics covers the activities of inventory management, order processing, warehouse and handling, and physical distribution. SCM is the design and operation of the physical and managerial systems needed to transfer goods and services from vendor to customer in an efficient manner. While logistics may be a function, SCM may be a process involving entire commercial activity.
The concept of SCM is deep-rooted more than three decades old and has passed three phases.
SCM Phase 1: Physical distribution management: It gave a changeover/push to inventory management as during those times manufacturers were seen as a separate entity cut off from the process cycle, and similarly the output was contained separately in the form of warehouses.
SCM Phase 2: logistics management Integration: Sales, manufacturing, and other departments worked as separate entities within an organization till the second phase of Supply Chain management occurred. This phase recognized the importance of integrating operations within the organization like sales, procurement, manufacturing, warehousing, distribution, and transportation to realize an efficient and effective goods distribution system.
SCM Phase 3: SCM: The journey of logistics management from its initial days to its modern-day avatar is ‘SCM’. SCM increases and brings to its logical conclusion the scope to link various internal and external resources/ partners like suppliers, vendors, manufacturers, distributors, and customers with a formal way to deliver enhanced customer management and value through synchronized management of the flow of physical goods and associated information from source to consumption.
Information Technology in Supply Chain Management
Information technology simplifies the processing of knowledge output in the most comprehensible form Several well know organizations that are involved in supply chain relationships through information technology
SCM is the utilization of technologies from computing, electronics, and telecommunications to process and distribute information in digital and other forms with optimized reports, outputs as desired..
Information Technology is the study, research, creation, utilization, support, and management of computer-based information systems in the desired output, especially software applications and hardware. Not restricting itself to computers, as technology progresses, cell phones, PDAs, and other handheld devices, the sector of it’s quickly moving from compartmentalized computer-focused areas to other sorts of mobile technology.
A supply chain is the amalgamation of a network of suppliers, distributors, and subcontractors employed by a manufacturer to source its raw materials, components, and supplies. Logistics companies store, transport, and distribute supplies and work-in-progress within the availability chain and distribute finished products to customers or intermediaries. Supply chain and logistics operations network bring into core added advantages along with unifying like improving efficiency, reducing costs, increasing the manufacturer’s competitive market advantage.
In fact, the necessity for supply chain management is felt to increased profits for both customers and enterprises alike. While it increases the customer need for better products, lower costs, and the fastest supply, it improves enterprise plight by improving its productivity.
Reduced operational costs
• Improved flow of supplies
• Increased customer satisfaction
• Brings compelling bottom-line benefits to the enterprise
Corporate profitability is often linked to the deliverables of a supply chain with the assistance of the following equation:
Profit = Revenue + Customer service / Cost + Capital employed
The use of Internet has enabled companies to understand several supply chain-related benefits.
More Collaborative, timely development through enhanced communication among functional departments, suppliers, customers and even regulatory agencies
New channel capability to succeed in different customer segments and further exploit current market
Ability to reinforce traditional products and customer relationships through customization driven by Internet connectivity and interactivity.
Fundamental changes have occurred in today’s economy. These changes alter the connection we’ve with our customers, our suppliers, our business partners, and our colleagues. IT developments have presented companies with unprecedented opportunities to realize competitive advantage. So IT investment is that the pre-requisite thing for every firm so as to sustain within the market.
IT and Supply Chain Integration
Supply chain management (SCM) is the flow of products and knowledge between supply chain members’ organizations. IT technologies are helpful to coordinate the activities to manage the availability chain. In an integrated supply chain where materials and knowledge flow during a bi-directional flow., Managers must understand that information technology is just the processing of data on computers.
At the earliest stage of the Supply Chain (the late 80s) the knowledge flow between functional areas within a corporation and between supply chain member organizations was paper-letter based. The paper-based transaction and communication were slow. During this era, information was often overlooked as a critical competitive resource because its value to provide chain members wasn’t clearly understood. Few factors have strongly impacted this alteration within the importance of data. First, satisfying customers has become something of a company’s primary goal. Serving the customer for the best results, most effective, and performance-based results have become critical. Secondly, information information, data processing escalates managers’ abilities to scale back inventory and human resource requirements to a competitive level, and eventually, information flow plays an important role in strategic planning.
Supply chain organizational functions
All enterprises participating in supply chain management initiatives accept a selected role to perform. They also share the joint belief that they and everyone other supply chain participants are going to be happier due to this collaborative effort. The power within the availability chain may be a central issue. Retailers have gained a lot through SCM technologies.