Manufacturing Supply Chain Management

Background

There may be no better predictor of continued and future success for a manufacturing business than its ability to react to change. In yesterday's world, the key was how big and strong you were.  In today's mercurial global marketplace, it's all about how agile you are.  Agility is the true differentiator between those who will succeed and those who will fall short. 

Manufacturing success is measured in profitability.  Maximizing profitability requires that short-term, tactical and strategic decisions involving procurement, production, warehousing, transportation and sales be made swiftly and without error.  Whereas manufacturing execution systems (MES) deal effectively with the operational aspects of the production environment, supply chain management (SCM) systems greatly compliment this functionality by providing intelligent decision support for all portions of the supply chain.  In the same way MES technology empowers the quality and process engineer by providing a real-time picture of production activity, SCM technology facilitates the optimal utilization of manufacturing resources, such as labor, routing, equipment and materials.  The net result is a dynamic production line that is able to instantly respond to an effectively limitless number of business scenarios.  Regardless of whatever changes are incurred within the supply chain, the line automatically adjusts to the optimum configuration, to yield the maximum return on product with the minimum input of resources.

Benefits

Competition is more intense than ever, product life cycles are becoming shorter, and obsolescence, once slow to arrive and easy to anticipate, is now often quite sudden.  Manufacturers can no longer afford to maintain large inventories of product to account for a customer demand that is continually shifting and technologies that are constantly changing.  However, an additional barrier to maximized agility is the fact that many companies have significantly reduced their workforce, and are spending less on capital equipment.  As a result they have fewer production resources—capacity—and therefore, are less able to react to fluctuating market demands.

This is precisely why SCM technology has become an integral philosophy of so many successful manufacturing businesses.  SCM is all about converting raw materials into finished goods in the most efficient fashion.  Business concepts such as just-in-time manufacturing and pull-based scheduling have become mainstream practices precisely because manufacturers are now able to exploit the power of SCM. When properly implemented, SCM provides:

• Improved product delivery by optimizing transportation pathways and procurement cycles

• Reduced inventory and warehousing costs because of just-in-time and supply allocation planning

• Reduced labor and capital through optimized scheduling and resource allocation

• Faster response times to fluctuations in customer demand by time-to-market optimization

The net result:  Maximized profits corresponding to minimized costs and optimal utilization of resources. SCM yields tremendous added value by providing decision support capability for continuous planning and optimization.  This is accomplished by managing both the demand side as well as the supply side, because optimizing the supply of needed resources and finished goods requires that a rigorous and accurate definition of demand be established.  There is an obvious synergy that more traditional ERP planning systems have completely ignored.

The Demand side involves accurate customer forecasting and production planning.  The Supply side is fed from the demand side and involves, among other things, optimal resource allocation, inventory planning, procurement planning and distribution planning.  One of the most powerful features of SCM is that when one or more inputs are modified at any point along the supply chain, the change is propagated throughout the entire chain in both directions.  The result is that all aspects of the supply chain immediately accommodate, and, more importantly, are optimized to the new scenario.  Simply stated, SCM is completely dynamic.

A complete implementation of SCM goes far beyond the manufacturing arena, however, and covers other associated areas such as customer management, product lifecycle management and strategic business planning which includes vendor management and competitor analysis.  The good news is that SCM can be implemented in a staged manner according to what suits your business needs.  Regardless of which components are selected for initial deployment, the value returned from their utilization will be realized almost immediately.  Moreover, many organizations find that successive deployments of SCM functionality are paid for by the value returned from the previous release.  It's a claim that few—if any—other information systems are willing to make, and rightly so.

For the majority of companies that already have some type of ERP platform, the reality is that a SCM system can sit directly on top of the existing infrastructure.  SCM systems are specifically designed to input data fed from your corporate data systems.  In fact, SCM can be thought of as value added ERP because of the enormous decision support capability it adds to even the most sophisticated ERP platform.

Conclusion

For a manufacturing business to even endure in today's marketplace requires at least some degree of plant automation and MES.  However, for the same business to grow and ultimately prevail over the long term requires lightning quick business reflexes and intelligent decision support for any number of previously unplanned scenarios.  This is precisely what Supply Chain Management technologies provide.  Investment in SCM yields a rapid and substantial ROI without sacrificing the current IT infrastructure.  Better yet, SCM is designed to directly work with the systems already in place.  In short, SCM is the safest, fastest and most reliable way to insure long-term competitive growth and maximum profitability.

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