SCM (Supply Chain Management). Supply Chain Management (SCM) Scm Systems

SCM Implementation Risk Management

Supply chain management system SCM (Supply Chain management)

A. Plotnikov i2 CIS company

The implementation of the SCM (Supply Chain Management) system of supply chain management allows to significantly reduce costs and improve the quality of product supply from the moment of extraction of raw materials to the moment the product is received by the end consumer. When SCM is implemented, safety stocks along the entire supply chain, the cost of storing safety stocks, and the volume of routine supply management operations are significantly reduced. At the same time, the requirements for the accuracy of the data entered into the system are increasing, and the risks for the business associated with the mistakes of operators and managers are significantly increasing.

The functionality of SCM systems is divided into two main blocks: supply chain planning (SCP) and SCE (Supply Chain Execution). The SCP planning block includes components responsible for modeling and optimizing supply chains (for example, calculating the location of warehouses, their capacity, planning traffic flows), as well as the formation calendar charts, forecasting the demand and supply of products. The SCE is responsible for the transport and warehouse functions. Its tasks include determining the optimal route for the transportation of goods or raw materials. In this case, the system is based on such criteria as delivery time, transportation and handling costs. The SCE also monitors delivery.

Typically, the implementation of the Supply Chain Planning and Supply Chain Execution functionality occurs within the framework of various, fairly independent projects. we will consider separately the risks for each of these projects.

Implementation of Supply Chain Planning requires entering a large amount of information into the system, which is necessary to model and optimize logistics processes. Often, the implementation team starts looking for information after the start of the project, and as a result, the project is delayed. Due to the lack of time, some of the important data is entered without careful analysis and verification, and then the simulation result is inaccurate.

To reduce this risk, before starting the project, they collect information on the cost of logistics costs along the entire supply chain and on the company's development plans. The hardest part is collecting information on logistics costs. In particular, it is difficult to obtain correct information about the cost of storage and warehouse handling of a unit of goods in warehouses, the dependence of the cost of rail transportation on volumes, and the throughput capacity of railways. nodes (especially in Central Asian countries), statistics on customs processing of goods. Before starting the project, it is also necessary to collect statistics on sales, the company's plans for strategic marketing, including changes in the product portfolio, plans for the company's expansion, and the policy of mergers and acquisitions. The availability of prepared and verified data will allow the implementation of the Supply Chain Planning project to be completed within the planned framework and to obtain adequate plans for the development of supply chains.

The second most important risk is the change in the business planning process. In fact, the introduction of a planning system is the adoption of a new ideology of business operation. A radical change in business processes creates significant resistance from employees who believe that their position and role in the organization is being downgraded. To reduce such risks, it is necessary to seriously consider the issues of motivating those employees who are affected by the implementation of the system. It is also important to clearly define, and it is better to fix in the form of regulations the duties of employees after the implementation of the Supply Chain Planning system.

The implementation of the Supply Chain Execution functionality usually falls into two projects: the implementation of the supply chain management system and the implementation of the WMS warehouse management system. Let's first consider the risks of implementing a supply chain management system without WMS. In our opinion, there are two main risks for such a project. The first risk is caused by incorrectly entered data, and the second is due to poor quality interfaces between the SCE system and other systems.

Prior to the implementation of the SCE system, safety stocks are stored in many parts of the supply chain, many people are involved in the process of managing it, so operator errors are compensated for by safety stocks and other employees. The implementation of SCE results in fewer chain operators and reduced safety stocks. Requirements for the quality of the input data and for the accuracy of the operators' work are increasing.

In order to avoid the risk of entering erroneous data within the framework of the implementation project, it is necessary to lay down additional processes to ensure the quality of the entered data and the correctness of the decisions made. Let's give two examples of errors when working with SCM from practice. In one case, when a document was being drawn up on the dispatch of a large vessel delivering hundreds of cars to Russia, the operator did not correct the default port code of the system, and hundreds of cars almost left for the other end of Russia. In the second case, when sending from Moscow to Khabarovsk, due to operator error, instead of one pallet, three carriages of medical syringes were shipped from the warehouse. From simple ways For data quality control, we recommend using an automatic procedure that detects when data at the input or output of the system significantly deviates from the acceptable range (for example, significantly exceeds the average statistical data), after which the procedure requires additional verification of the data by another operator.

The second most important risk of an SCE implementation project is the incorrect operation of the interfaces between the SCE and other systems, primarily the enterprise resource management system (ERP) and the warehouse management system (WMS).

To avoid the risk of incorrect operation of the interfaces, you must:

• clearly describe the processes that affect the interface between systems. It is imperative to describe the operation of interfaces in case of process exceptions;
• carefully customize interfaces;
• prepare a test plan that includes checking the operation of the interface in case of exceptional situations;
• test the operation of the interface for all exceptional situations even before the system is put into commercial operation.

When implementing SCM, there are risks that are typical for most IT projects, namely the lack of qualified personnel, the qualifications and motivation of the implementation team, the quality of working out business processes, the quality of testing, and actually preparing for the transition to a new system. More details about compensation for these risks are written below, when discussing the risks of implementing a WMS system.

Now let's look at the risks of implementing a WMS. In this case, two situations are possible: a new warehouse is automated and an already functioning warehouse is automated. Let's start with the problems that arise when automating a new warehouse. Usually, a contract for the implementation of WMS is concluded at the moment when the warehouse is practically built. All that remains is to fill the floors, mount racks, and purchase storage equipment. This is where the most common problem lies - the technical unavailability of the warehouse at the time of launch.

Most often, after training and setting up the system, it turns out that the contract for the installation of racks is paid only today, and the racks will be installed only in a month. In this situation, the WMS provider company is faced with the fact that the project is delayed, and its specialists switch to other tasks. The project team, which was formed by the WMS buyer, is sent on vacation or transferred to other jobs. After the warehouse has been brought into technical readiness, the launch takes place, and additional training is often required. As a result, both the buyer and the supplier suffered losses due to the downtime of their teams, and part of the team changed jobs during the downtime.

What actions should be taken to compensate for this risk? Since this problem arises in our country in most new warehouses, it must be put one of the highest priority. Before concluding a contract, a WMS supplier company should make sure that contracts with companies that supply and install warehouse equipment are not only concluded, but also paid. It is the terms of payment that most often slow down the start of work. The timing of delays is particularly influenced by the installation of racks, the supply of radio terminals, the purchase of servers, the connection of communications and the Internet to the new warehouse. If delays are foreseen in the technical readiness of the warehouse, work on the project should be started later.

Another problem of the new warehouse is the lack of qualified personnel. At the moment, there is a shortage of qualified warehouse workers on the Russian market, and therefore the warehouse management must make significant efforts to recruit qualified personnel by the time the warehouse is launched. Warehouses, where staff salaries are slightly lower than market ones, are implementing WMS with great difficulty. If a WMS supplier discovers that a significant proportion of employees in the warehouse are people of retirement age and students, he should include in the project plan additional time for staff training, system refinement, and possible re-launches.

Now let's move on to the problems specific to operating warehouses. Working warehouses are divided into two groups: with address storage and without address storage. When implementing WMS in a warehouse that worked without address storage, one must be prepared for the fact that the launch can be repeated several times. The personnel, who are accustomed to taking goods from any address, will continue to work according to the previous scheme. Accordingly, by the end of the first week after the launch, the product addresses in WMS will be very different from the real state of affairs. It is very useful in such warehouses to carry out the implementation of WMS in sections of the warehouse - galleries.

The main problem in the automation of working warehouses with an address storage system is the well-established schemes of processes in these warehouses. Very rarely, the business processes for which the WMS is written coincide with the old processes in the warehouse. Warehouse workers often insist that WMS maintain processes in the form they are used to, and therefore they have to agree to a large amount of WMS improvements, which usually delay implementation times, reduce system performance, and increase the likelihood of errors in its operation.

When a project is sold to a warehouse with a working information system for address storage, it is necessary to immediately stipulate a significant budget for improvements. It is better to plan the initial launch without any modifications at all. When the staff learns the advantages and disadvantages of the new process scheme through practical experience, they can return to the improvements. With this approach, the volume of improvements and the budget for them will be significantly reduced, and the launch will take place much faster.

The next important risk in the implementation of the system is the qualifications and motivation of the implementation team. Members of the implementation team from the side of the system supplier must have successful experience in launching WMS, as well as be motivated to complete the work efficiently and on time. Large WMS vendors usually meet these conditions. At the same time, for the project team on the part of the customer of the WMS system, qualifications and motivation are often the primary problem.

The customer's implementation team should have at least two highly qualified specialists. The first one is an employee with a good knowledge of the business processes of warehouses with address storage under the control of WMS systems. Typically, a shift supervisor or operator group leader who has worked for several years in warehouses under the control of WMS systems is suitable for such a role. The second employee is an IT specialist with experience in building reports, knowledge of the DBMS on which the WMS will run, and also experienced in building interfaces between information systems. Wage such specialists are commensurate with the salaries of the managers of the warehouse complex. As an option to motivate these two employees, in case of a successful launch of the WMS system, the assignment of the first employee to the position of one of the warehouse complex managers, and the second - to the position of the head of the IT service of the warehouse complex with appropriate financial bonuses. Attempts by the customer to save on two highly qualified employees and transfer their functions to the team of the supplier of the WMS system negatively affect the operation of the warehouse after its launch.

After launching the system, a business process specialist will possibly perform the functions of a wаrehouse manager (an employee who manages the processing of orders in a warehouse) or, if he is employed in other jobs, another specialist must be trained for this position in advance. In addition, the WMS customer must hire and train an employee in stock manager functions in advance. This employee will manage the settings for items and bins in the WMS. To a large extent, the efficiency of the warehouse after the implementation of the system depends on it. For example, this employee can allocate for an item with high frequency circulation (goods of category A) a place in the selection zone, convenient for frequent applications (selection zone of category A), or a place on the outskirts of the selection zone (selection zone of category C).

It is very useful for all warehouse staff to popularize the idea of ​​introducing a new WMS, to explain the benefits of implementing the system. It is useful to announce small bonuses to successful warehouse employees if the warehouse switches to the new system on time.

The next important risk that must be controlled when implementing a WMS system is the quality of working out business processes. Warehouse processes should be documented in detail. In this case, special attention should be paid to exceptional situations. For example, branches of business processes should be described - what is supposed to be done if the delivery contains a product that is not in the electronic invoice, and if this product is absent in the product directory of the WMS system. The lack of instructions for working in exceptional situations often leads to stoppage of the warehouse, accumulation of errors and discrepancies between the data of WMS, other information systems and the actual situation in the warehouse.

Testing is one of the most laborious stages of implementation. It often happens that, due to the tight deadlines of the project, they try to fit testing into several days. It is very dangerous. It is easier to fix bugs found during the testing phase than to fix a working system. Before testing, you should design it detailed plan... Testing must include modeling of all exceptions. In the final integration testing, it is important to check all processes, including exceptions, with the involvement of several employees using several radio terminals. It is imperative to test exceptional situations in the operation of interfaces between information systems.

The next important risk is preparation for the transition to the new system. Before starting WMS, you need to develop a transition plan, in which all the work should be written in detail and agreed upon. In particular, the plan should clearly state who, when and in what format prepares data from directories for WMS. The transition process must be modeled as business game... As a result, problem areas of the transition will be identified, and the personnel will learn the sequence of operations when switching to work with the new WMS.

Now I would like to consider the next issue - various launch schemes. The first approach, when the entire warehouse is launched at once, is the most traditional one. In this case, the WMS processes the goods of one owner. At first glance, this is the cheapest and fastest way. But we are not aware of any examples where such a launch went smoothly. Usually it is associated with rush jobs, when errors identified during the launch are corrected right on the spot. Very often, a warehouse launched according to this scheme is stopped a week or a month after launch, the system is refined and then re-started.

The second option is when the warehouse is launched in parts. To do this, choose one rack and one group of goods. This product is processed using WMS, and the rest of the warehouse is running in the old system. Then the next rack and the next product group are added to the WMS. With this approach, errors and failures do not disrupt warehouse operations. The launch of WMS in the warehouse is slower, and there is a gradual involvement of personnel.

There is another type of launch scheme, when, in order to reduce risks, in the first time after launch, warehouse operations are recorded in the old and new WMS systems. Typically, this approach significantly increases the workload on warehouse personnel. In addition, none of the staff, until the old system is turned off, considers the new system to be put into real operation. Accordingly, the transition to the new system is delayed. This version of the launch scheme can be used only in the case when quantitative accounting is carried out in the old system without address storage, and in the new WMS system - the actual management of the warehouse operation. The main prerequisite for using such a scheme is to launch in conditions when the WMS is not fully tested and there is a high probability of repeated launches.

So, when implementing SCM, the project manager needs to do a lot of work on project preparation, collecting data on logistics flows, costs, company development plans, to clearly control the situation on related projects that may affect the implementation project. The moment of the start of the project must be correctly chosen. Highly qualified employees are involved in the project both from the customer of the system and from the side of the executor - the supplier of the system. The processes by which they will work as a result of SCM implementation should be carefully regulated and tested, interfaces with other systems should be well debugged and tested.

In addition, the motivation of both the participants in the implementation project and the employees affected by the project should be well thought out. And to work with the system, it is imperative to involve several highly qualified employees both from the business side and from the outside. information technologies... All this will make the implementation process painless for the business, and the result of the SCM implementation will significantly increase business efficiency and significantly reduce costs.

The concept of supply chain management (management stages, tasks, advantages, functions, strategies). Supply chain evolution. SCM in the West, foreign market for solutions: ERP systems. SCM with Russian specifics and the domestic market of solutions (examples).

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Growing rapidly, demonstrating the important role that software solutions play in effective supply chain management.

The total SCM market revenue for 2013 was $ 8.944 billion (including purchasing apps), up 7.4% from 2012 revenue. No purchasing applications - only on products such as WMS (warehouse management systems), TMS (transportation management systems), etc. - in 2013 the market earned $ 6.1 billion, exceeding the figure for 2012 by 9%. According to Gartner's estimates, the compound annual growth rate from sales of SCM products will be 9.9% over the next 5 years, reaching $ 9.8 billion by 2018.

Top 5 market leaders were:

1. SAP- $ 2.138 billion, with profit growth of about $ 400 million or about 20% thanks to the addition of Ariba to its product range;
2. Oracle- $ 1.455 billion;
3. JDASoftware- $ 445 million;
4. ManhattanAssociates- $ 167 million excluding profit from sales of physical equipment, with a combined revenue of $ 414 million;
5. ToolsGroup - $ 275 million ;
6. Epicor- $ 159 million;

Here, we especially wanted to point out that such a spread in numbers should not scare or cause distrust in such market players as JDA, ToolsGroup, ManhattanAssociates and Epicor. These are O companies that specialize exclusively in supply chain management software. They have proven their worth, the statement that "SAP and IBM are not a panacea", they can be trusted and they offer no less interesting, effective solutions, which are more acceptable to customers in terms of cost. Especially, we believe these companies may be relevant in Russia and the CIS countries.

The most important trends in the development of the industry

In the past year, the following trends were observed in the categories ERP (Enterprise Resource Planning Systems) and SCP (Supply Chain Planning); WMS (warehouse management systems); TMS (Transportation Management Systems); and MES (Manufacturing Execution Systems).

ERP/ SCP/ SCM

Planning systems recorded 10% growth last year and $ 3.4 billion in profits. The following trends were observed in this category:

• It's all about stocks . Last year, there was interest in optimizing inventory, resulting in an 11% increase. This is the result of companies' continued interest in reducing inventory investment while maintaining or increasing service level investment.
• Another good year for S & OP (sales and operational planning). For the second consecutive year, S&OP applications, which closely link supply chain work with marketing and sales work, recorded 20% growth. These applications allow you to extract information from various sources and use it for real-time action. With the help of S&OP analytics, applications can create a script within hours, which previously took days with spreadsheets.
• Collaboration on a multi-business platform . Companies are increasingly looking to take advantage of their supplier and customer networks. SAP's acquisition of Ariba, which serves 1.5 million companies, is the most visible example of this trend. One such vendor can be highly integrated enough to bring together buyers and suppliers in a given industry. It also contributes to greater business transparency.
• Popularity of cloud technologies ... The cloud computing environment is growing at about 25% per year. More and more companies are migrating some of their operations to the cloud. However, in today's marketplace, the cloud is more used for networked applications such as transportation and procurement management.
• Positions ERP intensify . As in the past year, ERP vendors such as SAP, Oracle, Infor and Epicor continue to hold their market share. Manhattan leads the way in revenue, but other ERP vendors are expanding their customer base at a pace faster than market development. Thanks to their reliable WMS solutions, these companies can already recruit very large clients, because if given client already uses an ERP solution from a vendor, implementation of a WMS solution from the same vendor is much easier.
• One platform . Companies have long sought to optimize silos in their operations such as transportation and distribution. Now they are interested in doing all the different functions on one platform so that they can be synchronized and optimized. Manhattan and SAP have been developing similar platforms for a long time, unlike other developers who offer separate integration solutions.
• Work planning . This is a new kind of application developed by Manhattan and JDA, which allows you to organize work at all stages (from receipt of an order, selection of components on order to transportation): schedule work, ensuring that the necessary work force and equipment at the right time and in the right place.

WMS

The warehouse management systems market grew 3% in 2013, reaching just over $ 1.1 billion, and continues to grow.

Union WMS / WCS . As companies increasingly automate their manufacturing, especially in the area of ​​multi-channel commerce, the distinction between WMS (Warehouse Management System) and WCS (Warehouse Control System) is increasingly blurred, and users are beginning to value WCS more than ever before.

The transportation management software market grew 12% in 2013, reaching revenue of about $ 820 million.

• Development of TMS for small shipping companies . Over the past year, medium-sized carriers' transportation costs have grown from $ 25 million to $ 100 million. The industry is currently looking for a leading strategy to serve small and medium sized carriers.
• More analytics . Several leading TMS developers today offer scripting tools that go beyond traditional scheduling. For example, what will be the most profitable way of transportation, if the fuel surcharge increases by 10%, or what will be the required capacity of this enterprise in 4 months, so that you can agree with the transport agency today.
• Mobility . Software solution providers are ditching the custom hardware that needed to be installed in the truck cab. Instead, applications are being developed that run on smartphones and tablets. Less bulky, they offer a more modern interface and can take advantage of social media.

Gartner estimated revenue from MES solutions last year at $ 1.6 billion, approximately $ 100 million more than in 2012. ERP solutions developers who add MES to their portfolios also have a significant contribution to this. The key incentive is the desire to achieve the promotion of information within the manufacturing enterprise.

The clearest example here is the example of a food and beverage company that in its first year, by improving visibility in the use of its raw materials, managed to save $ 800,000 by adjusting the amount of raw materials used in each batch. This is an example of production intelligence that helps you achieve quick profitable results in a year, rather than going through the entire MES process of operational management.

the site is working to raise awareness of the business community about such important areas of procurement and supply chain management. Purchasing, delivering, delivering to the client is not an easy task. Dozens of foreign companies are actively creating new products to optimize their work. Before it is too late, we propose to jump on the bandwagon of the departing train and use effective developments to increase competition and generate profits.

If you need help with the selection software for supply chain management, .

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As part of an SCM system, two subsystems can be conditionally distinguished:

• SCP - ( English Supply Chain Planning) - supply chain planning. SCP is based on advanced scheduling and scheduling systems. SCP also includes systems for collaborative forecasting. In addition to solving operational management tasks, SCP systems allow strategic planning of the supply chain structure: develop supply chain plans, simulate various situations, assess the level of operations, compare planned and current indicators.
• SCE - ( English Supply chain execution) - execution of supply chains in real time.

Supply chain management (SCM)

• Supply Chain Management (SCM) is a process of planning, execution and control in terms of reducing the cost of the flow of raw materials, materials, work in progress, finished products, service and related information from the point of origin of the application to the point of consumption (including imports, exports, internal and external movements), i.e. until the full satisfaction of customer requirements. The essence of the concept of "supply chain management" is the consideration of logistics operations throughout life cycle products, i.e. the process of development, production, sale of finished products and their after-sales service.
• Supply chain management is a business strategy that provides effective management of material, financial and information flows to ensure their synchronization in distributed organizational structures.

SCE System Composition (DRP)

• Company sales forecast- forecasting weekly / daily sales of goods;
• Inventory Management- optimization planning of the guarantee stock, current stock, etc., taking into account the selected stock management model for each product category;
• Replenishment management- optimization planning of supplies within the company's logistics network, taking into account the planned sales, supplies from the manufacturer, the availability of leftovers, transport capacities, various restrictions and business rules.

see also

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See what "Supply Chain Management" is in other dictionaries:

Supply chain management- (SCM) is the process of planning, implementing and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work in process inventory, and finished goods ... ... Wikipedia

supply chain management- ➔ management * * * supply chain management UK US noun [U] (ABBREVIATION SCM) PRODUCTION, COMMERCE the activity of being in charge of and controlling the process of getting a product from the place where it is made to customers ... Financial and business terms

Supply-Chain-Management- Gegenstand des Supply Chain Managements sind komplexe und dynamische Lieferanten und Kundennetzwerke. (vgl. Wieland / Wallenburg, 2011) Der Ausdruck Supply Chain Management (SCM) bzw. Lieferkettenmanagement, deutsch auch Wertschöpfungslehre,…… Deutsch Wikipedia

Supply Chain Management- Der Begriff Supply Chain Management (SCM) bzw. Lieferkettenmanagement bezeichnet die Planung und das Management aller Aufgaben bei Lieferantenwahl und Beschaffung, Umwandlung und aller Aufgaben der Logistik. Insbesondere enthält es die…… Deutsch Wikipedia

supply-chain management- The management of the links between an organization and its suppliers and customers to achieve strategic advantage. Many specialist companies now offer to manage the whole of the supply chain, on behalf of manufacturers. Supply chain management ... ... Big dictionary of business and management

Supply chain management- Gestion de la chaîne logistique Pour les articles homonymes, voir SCM. Ne doit pas être confondu avec Gestion de configuration logicielle. La gestion de la chaîne logistique (GCL) (en anglais supply chain management, SCM) est l activité qui… Wikipédia en Français

Supply Chain Management- 1. Begriff: S.C.M. bezeichnet den Aufbau und die Verwaltung integrierter Logistikketten (Material und Informationsflüsse) über den gesamten Wertschöpfungsprozess, ausgehend von der Rohstoffgewinnung über die Veredelungsstufen bis hin zum ... ...

supply chain management- / sə plaɪ tʃeɪn ˌmænɪdʒmənt / noun the management of the movement of goods and the flow of information between an organization and its suppliers and customers (NOTE: Supply chain management covers the processes of materials management, logistics, ... ... Marketing dictionary in english

supply chain management- A cross functional approach to procuring, producing, and delivering products and services to customers. The broad management scope includes sub suppliers, suppliers, internal information, and funds flow. See also supply; supply chain ... Military dictionary

supply chain management- ● en loc. f. DECI Voir SCM ... Dictionnaire d "informatique francophone

Books

• Supply Chain Management in the Drug Industry. Delivering Patient Value for Pharmaceuticals and Biologics, Hedley Rees. This book bridges the gap between practitioners of supply-chain management and pharmaceutical industry experts. It aims to help both these groups understand the different worlds they live in ...