With today's emphasize on cutting costs and streamlining expenses, many companies are looking to improve their bottom lines with more effective supply chains. Unfortunately, many people involved with companies don't have a clear understanding of what a supply chain is or how it fits into the companies overall strategy.
Supply chains include a company’s entire manufacturing and distribution process. They involve every step of the production from planning to manufacturing to handling defective goods. The overall goal of these chains is to keep the process running smoothly at all times and to keep all of the components (i . e. vendors, warehouses, etc.) connected.
Even for business individuals who do understand the essence of the supply chain, they may not understand how it fits in or how it is different from another popular technology: ERP (Enterprise Resource Program). In fact, supply chains often work best in conjunction with an ERP system but they are not meant to replace or to use instead of such a system because ERP systems involve a multitude of business activities, including customer service and production planning that are not a part of supply chains. Supply chains are generally concerned with the flow of raw materials, manufacturing, production, and distribution. However, the ERP system does organize a lot of the information supply chains use to run efficiently and without that system most companies run into problems effectively setting up their supply chains.
Technology also plays an important role in the success of supply chain management. Even though the supply chain concept pre-dates the Internet, only through the use of web-based software and communication can it truly reach its full potential. Before the Internet, companies were limited because they were not able to receive or to send updates, feedback, or other important information in a timely fashion. Additionally, companies were limited in their ability to work with global partners because of language barriers and time differences. Using the Internet to handle most of the elements involved in supply change management, including procurement and communication, makes the exchange of data and the running of the supply chain faster.
One of the biggest benefits technology has given to the supply chain concept is the ability for companies to collaborate. These collaborations are designed for the mutual benefit of all parties. For example, a supplier of consumer goods may be linked up via the Internet to one of its distributors so that when the supply gets too low an order for more of those goods can be placed automatically. In this way, the distributor never has to worry about running out of a product and disappointing customers and the supplier doesn't have to worry about maintaining a large inventory in expectation of demand. Similar systems have also been constructed to send out multiple requests to vendors when an order is placed. Collaborating this way makes better use of existing resources and paves the way for a larger profit margin on all sides of the equation.
While the benefits of supply chain management are many, using technology to achieve those benefits does have two main drawbacks: one is resistance from vendors and the other is resistance from employees. Suppliers of goods are often hesitant to jump on board because of the initial costs involved in setting up their own end of supply chain management system and because most vendors do not have a trusting relationship with their buyers. To overcome this obstacle, the strong relationship must be present and the seller needs to be able to see the profit potential on their end of the arrangement. Likewise, many employees have learned to develop a hate-hate relationship with new technology. After all, it costs them their jobs and often makes them feel that their work is more tedious or more complicated. Plus, software mistakes, which are inevitable at the beginning, may cause other employees to lose faith in the system altogether. Employees need to trust the system, the company, and their ability to use the program if they are going to adopt the supply chain management software.