Supply Chain Management

1.4.3 Supply Chain Management

The supply chain is a functional net-link model integrated by suppliers, manufacturers, distributors, retailers and final users, a net-link model that, under the control of information, logistics and fund flow control, that start with procurement of raw materials, makes the intermediate products and final products, and then delivers the products to the consumers through the sales network.

Supply chain management (SCM for short) is an idea and method of integrated management, and performs functions like logistics plan and control from supplier to final users in the supply chain. SCM is an integrated process which aim at providing the best services. Simply speaking, SCM perfects the process of information and products, including reception of order, procurement of raw materials, and provision and consumption of goods. SCM not only plays an important role in management across departments and functions, but conforms suppliers and customers beyond the organizational limits.

Previously, SCM focused on stock management. As a cushion to balance limited production capacity and adapt to changes in clients’ demands, it sought, by all means of coordination, to balance production, stock management and the fund needed for rapid and reliable delivery of products to the users, in order to decide the perfect volume of stock investment. Therefore, its main task is to manage stock and transport. Nowadays, SCM considers all enterprises in supply chain as an indiscerptible integrity, thus making all functions like procurement, production, distribution and sale an organic body of balanced development.

Guided by the plan of synchronous and integrated production, and supported by technologies of all kinds, particularly the computer network, SCM is carried out around supply, production, logistics and satisfaction of client’s demand. SCM

Introduction to E-commerce

mainly includes plan, coordination and control of the materials and information from suppliers and users, aiming at improving services for clients, reducing overall trade and seeking a balance between them.

The presence of e-commerce forces manufacturers and wholesalers to be active in responding toward retailers and clients, but the pressure of competition is compelling the manufacturers to reduce costs, shorten the time for ordering and raise the work efficiency. Therefore, manufacturers are under great pressure, and need to use computer technology to better management of SC, raise production efficiency and improve logistic work, while maintaining the active response to the changing market and client’s demands.

The interactivities among suppliers, manufacturers, retailers and clients are developing toward more complex and global direction.

A dramatic progress has been made in applying the SC on new-tech platform, the capacity also being improved to organize the integrated process by sharing and planning coordinated information. Under the SCM pattern of e-commerce era, information is now substituting for storage, and accordingly the enterprises which are good at information management will not have valuable stock. When the competition changes from B2B to SC2SC, the enterprises that cannot figure out this trend will be dropped out. The use of advanced SCM devices will bring dramatic enterprises competitive advantages.

1. SCM Pattern

Enterprise integration is the core of SCM, which has two chief types as shown in Fig. 1.12: push and pull.

Figure 1.12 Change of supply chain from push pattern to pull pattern In pull type, consumers are on the front of SC, also called demand-driven type.

When client check on the counter, POS will record the details of each purchase; distribution center will add goods to shops according to record; after the data of each delivery center is gathered at the manufacture’s office, manufactures will then accordingly add goods to distribution centers; the manufacture’s production program will update according to distribution arrangement and also will adjust the procurement arrangement. Finally, suppliers of raw materials will also change the distribution plan.

1 Fundamentals of E-commerce

Compared to push type, pull type boasts the following advantages: ķ support the continuous changes in products ĸ shorten the time period for delivery Ĺ improve the service for clients, with the cost per unit down ĺ improve the efficiency in business Ļ be able to give an overall assessment on performance, which makes it much

easier to control

2. Functions of SCM

There are mainly the following 4 functions: Client relation management: fully understand and predict market and users’ demands by managing the information of client’s demands. By using client service, supporting sales or other functional systems, enterprises gather information, and collect the information gathered from the real business in order to pre-control.

Comprehensive logistics management: to manage the logistic work including production plan, procurement and stock from suppliers to clients.

Production process management: to manage the whole process of production, reducing production cost while raising the efficiency.

Accounting management: to co-manage fund flow with suppliers and clients by use of network accounting management system.

The thing in common among these functions above is the data integration and coordination in business procedure. The integration of these functions demands that all parties of SC agree on the key technology and the goal in business procedures, that is, eliminating wasting client’s value. For this reason, enterprises must find out the link short of competitiveness and the unsatisfied demands of clients, and rapidly improve them.

3. Components of SCM

Implementation of SCM system includes 3 processes: planning, implementing and assessing performance. Among these processes, client’s demands must be taken into account. At the same time, enterprises must perfect interior process, and transfer the traditional function-oriented viewpoint to process-oriented viewpoints.

(1) Plan system It refers to obtaining the right products in the right place at the right time. The

plan system facilitates enterprises to accept orders and honor the orders, speeds up gathering information of clients, thus making information flow in SC move smoothly.

The plan system needs to learn about client’s demands, and makes it a key in SCM system. The pull type demands that the enterprises effectively gather information about client’s need, including reasonable stock, stock circulation and the frequency of supplementing goods. The following systems need to be integrated:

Placing orders and making plans, which demands the capacity to predict the client’s needs.

Introduction to E-commerce

Receiving orders and inputting them, i.e. providing input for supplementing goods plan.

The plan system comprises distribution requirement plan (DRP for short), manufacture-managed stock and CRP. (2) Implementation system The implementation system promotes the movement of products in SC,

including performance of client’s orders, procurement, stock control, production and logistics systems. It aims finally at improving the efficiency of goods and services in SC by using them comprehensively.

The key for the system lies in the fact that enterprises can lift a singular business application of the implementation system up to an integrated system then can be operated in the whole process, in order to realize the across- department integration, strengthen the coordination of SC, and finally establish a set of e-commerce solution including implementation framework, perfection of business procedures, technical standards, communication technology, software, hardware etc.

(3) Performance assessment system The performance assessment system is a follow-up of SC’s operation that

facilitates to make open strategy and serves as a basis of guaranteeing the normal operation of SC so as to be more effective in reflecting the demands of changing market. It mainly comprises accounting system and financial management system. Nowadays most of business system and traditional reports and formalities are all designed for affairs settlement, but cannot satisfy the demands of decision support for access to information. To solve this problem, a number of enterprises began to use integrated database to do auditing and analysis, enabling the administrators to analyze commercial information on the prerequisite of no influence on the operation of the system.

The other trend of performance assessment is to use Internet-based proxy program to do pre-analysis. The proxy program refers to the program substituting for users, which fits the environment with a sea of data. Due to the enormous data, the information noticed by the administrators need to be given the top consideration. Since users have different point views on the importance of things, the proxy program can let users set up their own standard selection. This program can make the administrators pre-monitor the operational situation, and respond quickly to the significant events.