In a previous article we explored some of the top software vendors for supply chain management solutions. The supply chain is one of the major basics that any business stands on to build its foundation. It is simply the journey that the product takes till it reaches the end user who will consume or use that product. OF course the product won’t go straight from the manufacturer right to the customer; it makes many stops along the way. Supply chain management is a way to maximize the value provided to the customer while allowing the business to achieve a sustainable competitive advantage.
As we’ve seen in other blog posts, the recent trend in business is to leverage software whenever possible. Supply chain management (SCM) is no exception to this, and in fact many aspects can be automated or streamlined by the use of smart software.
SCM software comes in two different flavors: planning software and executing software. Planning applications are used to determine the best ways to fill an order. This is accomplished by fancy algorithms that take a look at lots of data and make pretty smart guesses at inventory needs in the future. Execution applications are used for tracking the physical status of goods during its transportation or in storage, as well as the management of materials and financial or accounting information.
If you are in the product business arena, then we think you can benefit from the use of supply chain management software. To help you get started on your search, we’ve compiled a list of the benefits that supply chain management can bring to your business, as well as a framework for implementing a new system in your business.
Decades ago, Toyota pioneered the art of just in time inventory. In a nutshell, this means that a business doesn’t spend precious warehouse space and energy on holding inventory that isn’t generating revenue. Rather, the business only orders enough of a supply to fulfill their orders.
Over time, the benefits of this approach were so obvious that it became the industry standard. Fast forward to today, and we now have a multitude of software vendors that supply products that meet the needs of a business employing the just in time inventory management methodology.
The best supply chain management software will include advanced analytical capabilities that will take advantage of all available data and let you know when to order which supplies or products to best meet demand. This will help your business minimize holding costs while still meeting customer demand. Let’s face it, there’s nothing worse than leaving money on the table by not having enough stock on hand to fulfill demand. Supply chain management software prevents this from happening to you!
One additional benefit to consider is that we will typically assume that fulfilling customer demand is a simple linear problem. Meaning, that if customer demand raises by some amount, we only have to increase production by a proportionate amount. This sounds good in theory, and is indeed intuitive, but may not be the case. Getting the product into the hands of the customer is not as easy as building it and shipping it. There are other factors to consider, such as shipping capacity, vendor supply capacity, maximum capacity of the production equipment, time taken to examine and package the product before it can be shipped… the list goes on.
Don’t make the unwarranted assumption that your business can simply increase production to meet demand, and all will be well. A manufacturing operation is highly complex and is an integration of many different systems, and as such is highly nonlinear in nature. This means that you need fancy software to help make accurate forecasts of how you’re going to meet customer demand.
A trend that started many decades ago, and continues to this day, is the movement of manufacturing operations from developed nations to the developing world. In particular, many manufacturers in the United States moved their operations to China, Russia, and India. Naturally, this was in an effort to reduce production costs. Well, things don’t always work out as planned.
As it turned out, these developing nations didn’t have the decades of manufacturing expertise that the more developed nations had. As a result, the quality of manufacturing took somewhat of a dip (though to be fair, it’s not drastic). This presents a whole new set of problems: how to reduce the cost of reworking and customer returns.
Good supply chain management software includes systems that keep track of defects and quality issues, and alert the appropriate personnel to budding issues. This allows the company to quickly and effectively stave off a potential catastrophe. Over time, enough data is accumulated that allows the software to assign a score to each supplier, which will enable the manufacturer to seek out higher quality vendors to better meet customer demand while reducing the rate of defective parts received. This is a huge bonus for the company.
In years past, invoicing involved a complex and bulky system of paper and human glue. This was messy, and could collapse in the event of sickness or extended leave of key players. Eventually, the arrival of spreadsheet and office software streamlined the process to an extent, but it was still largely based on human glue. Someone had to enter the data into the spreadsheet. While this is an improvement, it is not the ideal case.
Modern supply chain management software automates this process. Goods come in, get recorded, sorted and stored for use in production and the system makes sure to pay the vendor. Finished products go out, and the system automatically bills the receiver. If someone is late on payment, the software can alert the accounting department and send out an automated follow up message. Human glue is only necessary in the event that a receiver doesn’t pay.
How to Implement a Supply Chain Management System
So you’ve decided to take your organization into the new millennium (really, the current millennium but who is counting) and hop on the supply chain management software bandwagon. Not so fast there. There are a number of factors you need to consider to get the process going.
Overcoming Organizational Inertia
Humans are fundamentally resistant to change. We don’t like being forced to use new systems or learn fancy new skills. Overcoming this fact can be difficult, but some careful planning can make life easier for you. The first step is to get the management team aligned. This includes everyone from the top right down to the shift supervisors. If you can’t convince them, you’re going to have an even harder time convincing the rest of the employees.
Have each of them identify the problems the business faces with the supply chain. Take the list and look for common themes, and organize it into critical problems to solve and minor nuisances. Get the management team on board with adopting a new system to fix the critical issues. One thing to not overlook at this stage, is to take a look at things that work but can be streamlined.
Once the management has bottomed out on how the software can solve the critical issues and potentially streamline the other business operations, it is time to take your case to the employees. This is actually a marketing campaign, but one designed to sway your own organization. As such, you need to employ your marketing team, if any, or maybe even outsource that portion. It’s critical to get this step right, so don’t cheap out!
Choosing the Right Software
Once you have the backing of your organization, it’s time to start shopping around. Compile a list of vendors and cross reference it with your most critical features. Vendors whose software doesn’t meet those features don’t make the cut. Then sort the vendors in terms of those who can help you streamline your other operations.
Be ruthless in cutting out vendors at this stage. It doesn’t pay to chase down a dozen different software companies, as you are going to quickly get burnt out on the process. Narrow it down to just a few companies that offer the features you need and want.
Once you have the top 2 or 3 companies, it’s time to get some references. Talk to people who are already doing using the software, and see what their experience is. If everything checks out, you can move on to conversations with the specific vendors.
Give the vendors a call and ask them some pointed questions. Don’t be afraid to get detailed and technical. You need to know that your bases are going to be covered form day one. You can’t afford to pick the wrong vendor, as backing out means starting the process all over again. Be sure to request some demonstrations of the software. You need to see it in use to make sure it is user friendly and will be easy to adopt.
Making the Switch
Once you’ve selected your preferred vendor, it’s go time. Have your information technology team work with the vendor to make sure the process goes smoothly. Oh, and make sure your current systems don’t break in the process. It’s likely to take some time to get the new system up and running, so you don’t want to be dead in the water while you’re upgrading.
Set up training for your employees to make sure they are up to speed on the new system. You can’t afford to have anybody left behind, as each employee is critical to your operation. Designate someone as a super user, and get them the most extensive training. They will be the go to person in the future, after the vendor training is over, when people have questions.