Bangkok--2 Aug--M-Focus
Supply chains have existed since Day One of trading among partners. However, supply chain management is a more recent phenomenon, fuelled by the progress of information technology development. Upstream supply chain players include raw material suppliers, manufacturers, distributors and wholesalers, whereas downstream players are retailers and the consumers. Traditionally, these trading partners conduct their businesses independently, without sharing much information about the true demand at the consumer level. Today, great advances in information technology have made such sharing of information possible, giving rise to a new paradigm in management practices whereby trading partners collaborate in order to better serve their ultimate customers downstream, while at the same time avoid costly undertakings such as overstocking of inventories.
The evolution of SCM has its roots in the knowledge of materials management, physical distribution, functional logistics, and integrated logistics. Internal control of supply functions as well as external coordination with upstream and downstream entities, are necessary to create an integrated logistics system. J.B. Houlihan, author of “International Supply Chain Management” in 1985, has been credited with coining the term “Supply Chain Management.” Because SCM includes management of day-to-day operations, which tend to be activities for less senior people, Houlihan suggests that there should be some differentiating elements that distinguish SCM from past research that belongs to the domain of integrated logistics.
That differentiation is the strategic decision-making of supply chain management. This is the reason why SCM has been elevated to upper level management where those decisions and policies affecting the corporation are made. SCM is now seen as an important corporate strategy and an effective way of creating value for customers.
For functional products, the design of the supply chain should be aimed towards making it physically more efficient rather than making it as market-responsive as possible. This implies that manufacturing facilities should aim to be highly utilized, inventory lead time should be reduced as long as it does not increase cost, and suppliers should probably be selected on the basis of cost and quality rather than responsiveness.
Campbell Soup has been cited as practicing SCM using a technique called Vendor-Managed Inventory (VMI) whereby stocks of major retailers are continuously monitored by Campbell through daily transmission of electronic data interchange (EDI) messages that let Campbell know about the retailers demands. Such collaboration enabled Campbell to plan production and delivery efficiently and resulted in reduction of stocks throughout the supply chain. Campbell was able to offer everyday low prices to its retailers. Prior to such practice, Campbell used to offer low prices to attract big purchases.
Retailers would purchase in large quantities and store them in huge warehouses to be used gradually throughout the entire year. During peak production periods, Campbell deployed a large workforce and paid overtime as well as employing large fleets of trucks to haul the merchandise to retailers. Such nonvalue practices stopped after all players in the supply chain realized the benefits of collaboration.
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