This article is part of an Essential Guide, our editor-selected collection of our best articles, videos and other content on this topic. Explore more in this guide:
1. - Choosing the best SCM software for your organization: Read more in this section
- Get the most out of your SAP SCM software
- Which SCM software is right for your organization?
- Global SCM affects logistics management technology
- Supply chain in the cloud
- Know your SCM software
Explore other sections in this guide:
- 2. - Best practices for using SCM software
- 3. - Globalization's effect on security and the supply chain
- 4. - Test your knowledge on the global supply chain
A steady stream of supply chain collaboration platforms, software tools and visibility dashboards has emerged to help manufacturers manage and optimize their increasingly intricate and oftentimes volatile extended partner networks. But while the decades-old supply chain management (SCM) software category has matured and become better understood, technology advancements still can’t mask the increasingly complex and interdependent business processes of the global supply chain.
SCM software has evolved to provide rich functionality in the areas of planning, analytics and real-time visibility. At the same time, new cloud-based deployment models and consolidation among SCM vendors have transformed what was once an arcane and often disconnected set of applications and processes into a tightly integrated, more cohesive suite of tools.
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Yet despite all the bells and whistles, the manufacturers who enjoy the most success with supply chain visibility and real-time decision making have devoted substantial time to process improvements, enabling them to more effectively harness the power of these new SCM platforms.
“It’s not just about better, more powerful tools -- a lot of people are underutilizing these tools,” said C. Dwight Klappich, a research vice president at Gartner Inc., based in Stamford, Conn. “It really comes down to effective planning processes. Companies with great processes using a spreadsheet can accomplish more than a company with bad processes and phenomenal tools.”
The supply chain management software stack
Process improvement aside, vendors have made great strides over the last decade in improving both the planning and execution sides of the supply chain management equation. On the planning side, demand planning and forecasting is one of the most critical foundational elements and an area that has seen significant improvement since the inception of SCM as an enterprise software platform. For example, traditional demand planning tools were all about the statistical analysis and modeling of historical information to make assumptions about future demand. The modern-day twist on this capability is demand sensing, which helps companies glean insights from real-time sales and inventory data and make adjustments on the fly.
“Where we have gotten to is to have all information available in near real time, whether it’s point of sale data, promotional lift data or category management data,” noted Simon Ellis, practice director of global supply chain strategies at IDC Manufacturing Insights, a research company based in Framingham, Mass. “We’re moving from demand planning to demand sensing where it’s the ability to do a better job leveraging real-time data to create a better forecast.”
Predictive analytics and business intelligence capabilities are a big part of today’s demand planning and demand sensing picture. New additions to SCM software suites help manufacturers parse through massive amount of sales and inventory data to extract insights on everything from stock replenishment to optimizing inventory capacity to increasing supplies of raw materials to match planned finished goods.
“The hot button in this decade is analytics,” said Ann Grackin, CEO of ChainLink Research, a supply chain research and consulting company based in Newton, Mass. “Mobile and social technologies give manufacturers a chance to connect like never before, but we’re just at the beginning of understanding this information. It’s a new frontier.”
Demand sensing also comes into play for optimizing planning and collaboration around global supplier networks. Today’s supplier hubs don’t just automate and execute core processes like sending and acknowledging purchase orders or shipping notices, but rather leverage real-time data to give manufacturers visibility into their overall supply picture. This more timely view of data lets them simulate sourcing or production changes and what-if scenarios that allow for faster responses to changes in supply or demand or risk mitigation in the event of supply chain disruptions.
SCM advancements, globalization trends
Supply chain execution software has also made significant strides to address an increasingly global supply chain. Core components on this side of the SCM software stack typically include warehouse management system (WMS) software for optimizing and managing tasks and work products, including picking assignments, in distribution systems and warehouses. In addition, transportation management system software helps companies plan, consolidate and optimize shipments in the context of real-world constraints, costs and penalties.
The surge in global outsourcing coupled with escalating transportation and logistics costs, including rising fuel prices, make real-time visibility into these components an increasingly critical part of the mix. “A lot of companies understand inventory as an asset and the impact of inventory, but they haven’t thought about how certain strategies and actions affect transportation,” noted Gartner’s Klappich. “Transportation is a relatively high-cost element and most companies have under-invested in it.”
Trade compliance is another big area for manufacturers doing business on a global scale. Having systems to ensure goods are processed properly so they don’t get hung up in customs or that there is adequate transparency into supplier practices and products go hand in hand when attempting to mitigate supplier risk. “Transparency needs to go down to the supplier level,” said William Newman, managing principal at Newport Consulting Group, based in Clarkston, Mich. “From an audit perspective, there’s a thin line and that worries some executives. They don’t want to spend time to know intimately what their suppliers are really doing, but they really have to.”