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No company can nowadays afford to function alone. Partnerships are increasingly getting important and the effective exchange of information can determine profit or loss. An important method to cope with the increasing complexity is called supply chain management (SCM). It is enterprise-wide planning, management and control of all logistics tasks in the value chain. I decided to choose this topic because I had the chance to work with the system in practice in the Automotive Lighting plant in Jihlava. I want to explain the origins of this technology and take a closer look at its major features.
I will also try to show how this system increases business value and where its limitations are. Last but not least I show some example of practical use in small and medium companies and I will try to determine the latest trends in the industry of this technology. My chosen company is SAP which produces software in the fields of ERP, CRM and SCM.
The term supply chain management was named by Keith Oliver in 1992, economists called this the creation era. In the so-called integration era, SCM got developed along with Electronic Data Interchange (EDI) and Enterprise Resource Planning (ERP) systems with the internet-based collaborative systems.
SCM is starting to get widely used in the globalization era in the late 1980s. In the 1990s companies began to outsource manufacturing and distribution. This new step created need for manufacturing and distribution networks with many supply chains. (Haag, Cummings, McCubbrey, Pinsonneault, Donovan 2006) One of the major features of the SCM Software from SAP is that it can quickly help a company to adapt in changes in supply and demand.
There are newly developed tools to measure and report data and to provide a framework for good decision making in managerial accounting.
One of the tools I find very attractive is the Manufacturing and Supply Planning. This feature can forecast demand and accelerate production planning and the scheduling process. What company stakeholders typically provide input? What is the role of the financial staff? The Braskem Company, with headquarters in Sao Paulo, Brazil is producing Chemicals, with 6750 employees and $27. 7 billion revenue. The SAP software for SCM managed to optimize the supply chain processes and also increased sales forecast accuracy. The result was a 90% reduction of inefficiency-related logistics costs and $3 million value enerated in the first year after implementation of the software. (SAP, 2013)
Because there are many factors in a supply chain a problem in one of them could negatively influence the whole chain. If there is an unexpected event, it can have negative effects on the company. A new trend suddenly appearing in the demand can delay production and produce extra costs. One solution is to get information from more sources and paste them to the software. (Kallrath, Maindl 2006) There is software for smaller business called sap business one.
This software is scaled to Enterprise Resources planning, analytics and databases for small businesses. SAP Enterprise on the other hand, provides all the complex and flexible solutions for large companies. sap business one comes with significantly lowers costs to introduce and to educate staff in a company. The total cost of ownership is significantly lower than the corresponding implementation of SAP Enterprise. (SAP, 2013) The company danisco, from Denmark and the industry of consumer products improved their supply chain efficiency across the organization. They managed to increase forecast accuracy with the SAP CRM software.
On a 6-month timescale, the implementation of the software across 69 sites in 21 countries increased supply chain efficiency resulting in cost optimization and enhancing customer service. (SAP, 2013) The global brand Ferrero Group from Italia also used SAP software to enhance and reduce the cost of planning improvements. The company managed to shorten the job chains for demand and supply network planning. The benefits of these solutions are clearly stated. The need of purchasing additional hardware was eliminated, while the system performance was improved by 200%. SAP, 2013) Mibelle AG Cosmetics is a medium-sized company from Switzerland which produces consumer cosmetics.
The greatest benefit was the improvement of planning and warehouse transparence and precision while new partners from Switzerland and abroad emerged. The SAP software was chosen because of the easy implementation to the existing ERP application. (SAP, 2013) The future of the global companies is depending on a well processed SCM. Companies like SAP provide outstanding software and research in this field. As I know from my experience from Automotive Lighting s. . o. in Jihlava, a plant producing the head-lights for the Volkswagen Group TM and Japanese car producers, well implemented SCM management is the key factor in the success of such a company.
The industry is constantly developing and new technologies are emerging but software products like that from SAP is being produced and updated constantly. Although crisis is decreasing our business opportunities, in my opinion the constant research and development in the field of SCM is a key factor for success in our time coined by the term of hyper-competition.
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