Problem Areas of SCM:
SCM is highly integrated process and need very effective and integrated distributions networks, some of the problem in managing SCM may be:
§ Distribution Network Configuration
§ Distribution Strategy
§ Information Sharing
§ Inventory Management
Distribution Network Configuration:
· Setting up appropriate numbers and locations of suppliers, production facilities and warehouses is a big challenge.
· Establishing a strategy to ensure smooth flow of materials and goods is another big task.
· Among various locations and setup is another and setup is another issues for establishing successful SCM.
· Deciding on appropriate quantity of materials and goods to be maintained is another big stress area in SCM.
All the SCM activities can be grouped together into:
· Planning Numbers, Locations and Size of Distribution Network.
· Deciding on partnership with suppliers and buyers.
· Information Technology Infrastructure Setup
· Make or buy decisions.
· Product Design Coordination
· Production Decisions regarding contracting and scheduling.
· Inventory decisions regarding quantity.
· Transportation planning for goods.
· Payments terms structuring.
· Sourcing decisions of materials.
· Daily Production and Distribution Planning
· Production scheduling of each manufacturing facility resources minute by minute.
· Planning to meet demand.
· Daily Inventory Control.
· Logistics Control.
· Performance tracking of all activities.
§ This effect is related with forecasted error. We all know we maintain inventory to manage uncertainty in demand, accordingly inventory is managed based on possible forecasted demand.
§ And as per Whiplash, there is always a chance of error in the forecasted demand, and this error effect keep on increasing when we go farther from consumer to supplier.
§ Effectively, multiplied effect ends up providing excess or shortage of inventory quantity.
§ Alternatively to this forecast driven supply chain is demand driven supply chain, which reacts to actual customer orders.
§ The net result is near perfect visibility of customer demand and inventory movement.
§ But it is not easy to implement this alternative because this method requires significant investment in Information Technology and requires a culture with focus on customer demand.