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Supply Chain Management Benefits

 

Supply chain benefits are many and varied, but here's a few examples that demonstrate the upside opportunity.

  • (1990s) Hewlett Packard cut DeskJet printer supply cost by 25% with inventory modeling software.
  • (1990s) Campbell Soups reduced retail inventories by 66% while increasing fill rates using forecasting and inventory management software.

Improved Competitiveness

A significant payoff that organizations realize from their investment in supply chain software is the gain in competitive advantage. There are opportunities for cost reductions in procurement, processing, and carry costs. Also, the same organizations are reducing their working capital and generating higher sales.

Lower Cost of Doing Business

Wal-Mart consistently has the lowest prices, yet they have higher margins than the other discount retailers. Not only do they drive their cost down with supply chain efficiencies, they also work with their trading partners to drive down their cost. The net result is that suppliers pass on lower prices to Wal-Mart.

Procurement Costs

One of the biggest savings in transportation and labor is the use of Regional Distribution Centers (RDC) and Warehouse Management Software (WMS). The savings in transportation comes from virtually eliminating less than truck load (LTL) shipments. Labor savings is the result of automating and consolidating receiving and value added services at the RDC.

Another big savings comes from off shore manufacturing. Transportation management software (TMS) helps manage the many different legs and modes of transportation, and provides visibility to in-transit goods.

Other procurement savings are taking control of and optimizing transportation costs, and collaborating with suppliers in ways to help reduce cost.

Processing Efficiencies

Because of the tremendous volume that can be processed each day, WMS is a standard in organizations. What used to be labor intensive activities are being automated using auto-identification (barcode and RFID), electronic data exchange (EDI) and automated material handling equipment. The results are reduced processing cost and greater inventory and data accuracy.

Better inventory planning and distribution strategies help to reduce inventory handling.

Carry Cost

SCM planning is reducing the need for large inventory buffers, thus reducing storage cost, obsolete inventory, and the cost of capital tied up in inventory.

Reduce Working Capital

Lower Inventory

Because of Supply Chain Management planning, more efficient processes, lower lead times and greater accuracy, inventory levels can be significantly reduced. Lower inventory levels translates to less working capital tied up in inventory.

Cash to Cash Time

By decreasing supplier and customer lead times, the cash-to-cash cycle times are shorter, resulting in lower working capital requirements.

Higher Sales

Customer Value

With the use of enterprise software and market research, customer values can be evaluated and better understood. This allows for better alignment of SCM with the values of all customers, and especially the more profitable customers.

Higher Service Levels

By definition, higher service levels (the inverse is lost sales due to an out of stock condition) means higher sales and meeting customer needs, increasing the likelihood that they will be a repeat customer. Modern day SCM planning software facilitates higher service levels without increasing inventory levels.

Mitigate Risk

Globalization Risk

Globalization presents many transportation risks including delays due to differences in social norms, local politics, infrastructure, and government regulations. Supply chain management systems need planning and tracking capabilities for multimodal, multi-leg shipments, with the ability to coordinate logistics with offshore brokers, SCM partners and 3PLs.

Supply Chain Risks

Modern day SCM systems provide organizations with planning and management tools to minimize many of the supply chain risks, such as long lead times, inventory shrinkage and obsolete inventory. For example, TMS provides for transportation planning and tracking of goods, increasing the reliability of meeting schedules. The collaboration of demand and supply management improves the overall quality of inventory, reducing the chances of writing off obsolete inventory.

Compliance

Modern supply chain systems provide the features and capabilities to adhere to and comply with industry standards, trading partner agreements and governmental regulations. Other business software compliance features are tracking lot and serial numbers, maintaining the genealogy of parts and documenting the presence of goods with hazardous materials.

Samples of some industry standards include EDI data exchange, UPC, UCC, EPC auto-identification standards and VICS Standards.

Next - Supply Chain Software Pitfalls >>

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Supply Chain Software Guide

 

 

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