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A common buzz word today is Supply Chain or Supply Chain Management – and everyone seems to understand the substantial economic benefit of a finely tuned supply chain system. However, before this can be implemented, several cost effective steps need to be functioning. This article discusses these preliminary steps - which may be all you need for now. |
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Before Supply Chain It seems like everyone talks of Supply Chain and everyone wants to be fully implemented in Supply Chain Management or SCM so they can realize substantial benefits. In this haste to implement, there are times when the foundations to Supply Chain are overlooked and this prevents SCM success – and sometimes leads to abandoning the efforts fully. Even more frustrating is the failure to realize the much advertised benefits of an integrated SCM system – which causes people to debate the merits of SCM altogether. SCM is not a computer system or an IT program. It transcends the entire operation and requires efficiency all across the organization. For the record, SCM techniques are cost effective if properly introduced and well planned out. However, some of the techniques will not work if the fundamentals are not sound – and sometimes certain elements are not cost effective to implement. Before rushing into SCM, it is best to review these fundamental elements: 1. Is you raw and finished goods warehouse disciplined? 2. Do you use a production management system that determines raw material need on a per production order basis? 3. Does your customer order system integrate with the production system? 4. Does your production management system integrate with the warehouse inventory systems? 5. For Retail Sales, does your Point of Sales (POS) system integrate with the warehouse? 6. Are your management systems functioning in real time? A sound "yes" is needed in all the above to implement SCM. If this is not the case, you will probably stand to gain substantial returns by implementing each element above – probably in the order outlined. Warehouse Discipline and Inventory Management - A critical key No matter what type of business you are in, your warehouse must be well disciplined. All receipts and all disbursements must be recorded. A written inventory list must be accurate. Material must be easily located. Production Management Systems Manufacturing companies, even job shops, need a bill of material for each job. This list is checked against raw inventory before starting to assure material is available and is used to procure needed items. When manufacturing is complete, this system must update finished goods. Customer Order Systems Fundamental systems record customer information and the order. More capable systems check orders against existing inventory and ship from finished goods and when production is required they create manufacturing orders. Are the Systems Integrated? These systems are not islands – rather they interact and communicate back and forth. This is essential. Are the System functioning in Real Time? While the ultimate goal is instantaneously updated information, this is the final step before engaging in sophisticated supply chain elements. Before this is effective, each of the systems above must be functioning in and of themselves. This step usually requires an integrated computerized system - and the above steps must have this in mind when they are implemented. However, implementing real time before the above steps are functioning will only lead to frustration and will undermine success. Many small companies feel that real time software is too costly for them. Many of these companies use a book keeping software package like QuickBooks or Peachtree and feel they are "left out". However, properly implemented, the inventory management capabilities in products offered by these companies, will perform their inventory management needs well and in a cost effective way. Don't overlook this if you are a small company. Where Do I Start? Before plunging ahead, it may be very helpful to review your existing situation – and develop a cost effective plan for implementation of the fundamentals. Depending on your circumstance, maybe all you need for the near future are some fundamental steps. Properly implemented, with appropriate tools, you can then proceed further up the SCM pathway as is cost effective. Contact us for a no obligation, no cost initial review. Gene Bohn |
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