Supply Chain Management (SCM) :Techno-functional Guide

Supply Chain Management (SCM) :Techno-functional Guide

KNOW WHAT IS SUPPLY CHAIN MANAGEMENT (SCM)? : An Overview

his is one of the basic areas from management books. In fact lot of people have requested some more information on SCM, OPM and other manufacturing area. therefore,I take this opportunity, as this is one of my favorite topic, as I started my first job in PPC (Production Planning &Control) department of a big steel company a decades ago, so I hope I will surly help in giving a clear picture of SCM. Let's start with basic and gradually will move into ERP arena:

SCM is defined as combination of art and science that goes into improving the way your company find the raw components that needs to make a product or services and deliver it to customer. In Business word this art and science become functions that an organization undertake.

If you are IT guys you can understood SCM as:
Systems that support manufacturing managers in making decisions that optimize the trade off between capital tied up in stocks and inventories, versus the ability to deliver goods at prices and delivery dates agreed with customers.

In principle and reality, both inwards logistics operations to acquire materials to make products and outwards logistics operations shipping finished goods to final customers are monitored.

WHAT EXACTLY IS SUPPLY CHAIN MANAGEMENT OR WHAT IS BASIC COMPONENT OF SCM?

As per Supply-Chain Operations Reference-model (SCOR®) which has been developed by Supply-Chain Council. This model organized and focused on the five primary management

1. PLAN
2. SOURCE
3. MAKE
4. DELIVER
5. RETURN

1. Plan: This is vital part of SCM philosophy, where the companies normally need to make strategy for managing all the resource that go towards fulfilling the customer demand for the product and services that they offers. A big piece of planning is developing a set of matrices to monitor the Supply chain so that it would be efficient, cost effective and deliver high quality and value to the customer.

2. Source: It means processes that procure goods and services to meet planned or actual demand. This part of SCM consists of selecting right suppliers that will deliver the good and services that need to create your product. Developing a set of pricing, delivery and payment process with supplier is important. Also this will also take care of managing the inventory of goods, and services you receive from your suppliers, including receiving shipping, verifying them, transferring them into various facilities and authorizing supplier payment.

3. Make: This is basically a step where your company starts fulfilling the request or BUILT for products into finished state to meet planned or actual demand. Schedule activity necessary for production, testing, packaging and preparation for delivery.

4. Deliver: This is also called Logistic Process. This is the processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management.

5. Return - This is real pain of SCM model, which defined as processes associated with returning or receiving returned products for any reason.

Typical model can be best described as:

WHO IS THE STAKEHOLDER OF SUPPLY CHAIN

These are considered as stake holder of SCM:

• Customers
• Your Company
• Design Partners
• Material Suppliers
• Contract Manufacturers
• Logistic Providers

WHAT ARE DRIVERS OF THE SUPPLY CHAIN?

These are the main drivers :

• Production
• Inventory
• Location
• Transportation
• Information

1. Production
This driver addressing these questions: what products does the market want? How much of which products should be produced and by when?
This activity includes the creation of master production schedules that take into account plant capacities, workload balancing, quality control, and equipment maintenance.

2. Inventory
This driver addressing these questions: What inventory should be stocked at each stage in a supply chain? How much inventory should be held as raw materials, semi finished, or finished goods?
The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain.

3. Location
This driver addressing these questions: Where should facilities for production and inventory storage be located? Where are the most cost efficient locations for production and for storage of inventory? Should existing facilities be used or new ones built?
Once these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer.

4. Transportation
This driver addressing these questions: How should inventory be moved from one supply chain location to another? Air freight and truck delivery are generally fast and reliable but they are expensive. Shipping by sea or rail is much less expensive but usually involves longer transit times and more uncertainty.

5. InformationThis driver addressing these questions: How much data should be collected and how much information should be shared?

Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it.

GET FAMILIAR WITH TOP 10 TERMS, DEFINITIONS AND TERMINOLOGY IN SCM

Master Demand Schedule - MDS

The MDS is a consolidation of demand by product and time bucket

Master Production Schedule- MPS

The MPS is a statement of supply required to meet the demand for the items contained in the MDS. The master production schedule defines the anticipated build schedule for all products. The master production schedule also provides the basis for order promising (ATP) function

Material Requirements Plan-MRP

The Material requirements planning (MRP) calculates net requirements from gross requirements by evaluating:

• The master schedule
• Bills of material
• Scheduled receipts
• On-hand inventory balances
• Lead times
• Order modifiers

Advanced Supply Chain Plan- ASCP

Constrained Based and optimized version of MRP

Planned Order

Automatically suggested action from planning engine

Consumption

The process of "relieving" the forecast to prevent double counting of demand

Drop Ship

Having an order ship directly from the vendor to the customer without physically being in your inventory.

Vendor Managed Inventory- VMI

The process of giving the vendor the authority and visibility to determine what your inventory should be

Customer Owned Inventory- COI

Where you are managing the customers inventory on your premises and supply as required

Work Order/Sales Order

The request that you received from the customer for fulfilling there demand.

SIMPLE PLANNING CYCLE WITHIN AN ORGANIZATION

A typical planning cycle would start by loading the sales orders, forecast and other demand such internal orders into the master demand schedule (MDS). That demand statement would then be used as the schedule that drives the Master Production Schedule (MPS) . Take a note in regular MRP implementations the MPS is used as the schedule for ATP. Once the MPS is reviewed and updated is used as the schedule to drive the MRP process. The result of the MRP process is planned orders and exception messages. When released from MRP the planned orders for "buy" items become requisitions or purchase orders in the purchasing module and the "make" items become discrete jobs in the Work In Process Module. Once the finished goods are received into inventory it is shipped to satisfy customer orders.

Scenario I :Sales Order - Forecast Planning Cycle

This is the scenario where normally we are building to stock and satisfying sales order demand from stock. Here you will see the difference as planned orders are released to become purchase requisitions for components and work orders for sub assemblies and finished goods. The finished goods are then shipped to satisfy the sales orders.

Scenario II : Planning - Procurement Cycle

In the Planning-Procurement cycle we normally start where the first part of the planning cycle is complete and we have a planned order for a buy item from MRP. The planned order is released and becomes a requisition or purchase order in the purchasing module. A purchase order is then created from the requisition and sent to the vendor. The vendor would supply the materials. The materials would be received into inventory and the purchase order would be closed.

Scenario III :Planning - Drop Ship Cycle

In the Drop Ship cycle the process is as follows:

• A sales order is received from the customer.
• After the sales order is entered a process is run that creates a purchase order that matches the sales orders
• The item, quantity and required date information on purchase order matches that information on the sales order.
• The ship to address on the purchase order is the ship to address of the customer.
• The vendor ships the product directly to your customer. Once the vendor ships the product you receive" the purchase order and that creates the shipping transaction to satisfy the sales order.
• Matching accounting transactions complete the process

You can also see technical details for drop ship cycle in my earlier post.

Scenario IV :Planning - WIP Cycle

In the Work In Process cycle after the planning cycle is complete a planned order is released to create a discrete job. Material/components is issued the job or back flushed from inventory. The job is completed from Work In Process to Inventory.

Scenario V : Planning - Outside Processing Cycle

With Outside Processing you could be buying a service, an item or capacity from an outside vendor. The setup for each of these scenarios will be described in the training sessions to follow, however they all follow a similar process. A routing with an outside processing operation is setup.

After the planning cycle is complete a planned order is released to create a discrete job. Once the Discrete job is moved to a outside processing operation, a purchase requisition is triggered. The requisition is imported to Purchasing and a purchase order is created. The details of the discrete job such as job number, assembly number and quantity is tied to the purchase order. The purchase order is sent to the vendor. When the purchase order is received its destination will be shop floor and the assembly will be returned to the next operation on the work order.

This make an end of this discussion.

SCM Subsystem

In above we have understood SCM flow. Let's talk in term of SCM IT requirement. SCM subsystems are important because this is required to support manufacturing managers in making their decisions so that they can optimize the trade off between capital tied up in stocks and inventories, versus the ability to deliver goods at prices and delivery dates agreed with customers.

A typical flow and SCM cycle can be understood as fig below:

Typically A SCM consists of these sub-systems can be categorize and consist of:

Demand Management

This is basically co-ordination sales forecasts from all the players, including sales representatives at the point of sale through production to raw material suppliers, so that everyone is working to the same plan, rather than creating unnecessary safety stocks.

Distribution Resources Planning (DRP)

This will Keep track of the status of production and procurement of materials for each order, where the goods are located, what transport and warehousing is in use, what stock to keep and when to re-order.

Transport Management Systems (TMS)

This kind of subsystem normally keep the information such as :what modes of transport at what cost are available to the shipper; what costs and timings are associated with each route; the order in which to load transport; optimization of multi-segment deliveries; compliance with documentation required for customs and shippers.

Warehouse Management Systems (WMS)

These are the systems which are used to optimize the storage and picking of goods in a warehouse, also includes compliance with carrier and customer documentation standards.

Supplier Relationship Management (SRM)

This kind of subsystem keeps the information about suppliers of direct and indirect materials, such as agreed terms of trade, records of status, records of contacts between the enterprise and the various points of contact in suppliers.

Component Supplier Management (CSM)

Management of lists of preferred suppliers and preferred parts; terms of trade such as delivery and price associated with them; rationalization of existing parts to minimize costs by substituting equivalent parts.

I guess, the next question in mind would what are applications which are going to enable if anyone is going to roll out SCM functionality in Oracle EBS. Keep watching this space.

Supply Chain Management (SCM)

This article is an easy guide for Techno-functional consultant to understand SCM from Implementation as well as Oracle Application product Prospective.Lets start the topic with some of high points of earlier post .

• As mention in earlier post a Supply Chain is a network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product.
  • Make a note a supply chain is product specific, not company specific
• Supply chain management (SCM) is a systematic approach to manage the entire flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer.
• Moreover , SCM involves the flows of material, information and finance in a network consisting of customers,suppliers, manufacturers, and distributors.
• You should be clear with Flow that SCM can manage :
  • The flow of actual materials, the top middle bars
    • From suppliers : flows of raw materials, intermediate products, finished goods
    • Reverse material flows : returns, repairs, servicing, recycling, disposal
  • and the information flows
    • From suppliers : manufacturing capacity, delivery schedules, promotions they have going
    • Reverse flows : sales, orders, inventory, quality, promotions
  • And finally, there are financial flows:
    • From suppliers: Credits, consignment, payment terms, invoice
    • Reverse Flows : payments, consignment
• Supply Chain Management is the management of the entire value-added chain, from the supplier to manufacturer right through to the retailer and the final customer.
• SCM has three primary goals: Reduce inventory, increase the transaction speed by exchanging data in real-time, and increase sales by implementing customer requirements more efficiently
• The need for SCM is because effective Supply Chain Mgt. is the next logical step towards increased profits and market share.
• Supply Chain Management (SCM) in line manager prospective is "let's-keep-things-moving-efficiently".

What is Oracle's SCM Solution for Customer

Oracle Supply Chain Management (SCM) basically integrates and automates all key supply chain activities starting from design, planning, and procurement to manufacturing and fulfillment.It depends upon how the company or Line managers planning to use these application module in there business line. For better understanding from Product point, lets understood on eight key area as per figure:

Here are the details with underline Product which is potentially used.

1.Develop : SCM start with developing new products where Product specifications are created.

• Oracle Product Life cycle Management(PLM)
• Oracle Advanced product Catalog (EGO )

2.Market :Marketing and Sales generates demand for the Product by publicizing its features and how it would address customer priorities. In the process, Marketing also gets customer feedback and communicates to Product development group. These are application potentially can be used.

• Telesales (AST)
• Trade Management (OZF)
• Incentive Compensation (CN)
• Order Capture (ASO)
• Partners Online (POL) *

* Oracle Partners Online (POL) is also known as Oracle Partners Online (PRM).

3. Plan :Planning is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service.

• Advanced Supply Chain Planning (MSC)
• Global Order Promising (GOP )

4.Sell & Manage Orders :Maintain and manage the customer orders, order holds, notes and release the orders to warehouse for fulfillment based on requested date, product availability and customer credit limit.

• Order management (OM)
• Advanced Pricing (QP)
• Configurator (CZ)
• iStore (IBE)

5.Procure :Here you normally choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships.

• Purchasing (PUR)
• iProcurement(iPROC)

6.Manufacture :Schedule the manufacturing activities necessary for production, testing, packaging and preparation for delivery.

• Cost Management (CST)
• Process Manufacturing (GMA)
• Project Manufacturing (PJM)
• Quality (QA)
• Work in Process(WIP )

7.Fulfill & Release Management :Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

• Shipping Execution (WSH)
• Inventory Management (INV)
• WareHouse Management System (WMS)
• Transportation Execution (FTE )

8.Service & Maintain :Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

• Depot Repair (CSD)
• Field Service (CSF)
• Install Base (CSI)
• Service Contracts (OKS)
• Service Fulfillment Manager (XDP)
• Spares Management(CSP )

Oracle Product Acronym Listing can be re-validated from Robert's Blog.

This does not cover the Financial flow with SCM.Will take a detail discussion in some other post.

SCM Oracle Solutions

SCM Of Oracle E-Business Suite does covers each area of SCM as discussed in other post. Here is how best can describe as involvement of all five key participant.

Within SCM these are the business Process that can be fit with these application Module.

1)Procure to Pay

Here is flow that can be best understood with Oracle Modules Involvement.

Under this Business Process Oracle module can be potentially used as

• Oracle Purchasing(PUR)
• iProcurement(iProc)
• iSupplier Portal(isupplier)
• Payables(AP)
• Purchasing Intelligence(for BI)

Check out earlier Post for P2P details.

2) Order to Cash

Here is flow that can be best understood with Oracle Modules Involvement.

Under this Business Process Oracle module can be potentially used as

• Oracle Order Management (OM)
• Oracle Inventory (INV)
• Shipping Execution (WSH)
• Advanced Pricing (QP)
• Oracle Configurator (CZ)
• Warehouse Management (WMS)
• Receivables(AR)

Check out earlier Post for O2C, 1 & 2 details.

3) Lead to Service

Under this Business Process Oracle module can be potentially used as

• CRM Foundation (JTF)
• Sales Online (ASF)
• Marketing Online (AMS)
• Customer Care (CSC)
• Install Base (CSI)
• Depot Repair (CST)
• Service Contracts (OKS)
• iStore (IBE)
• iSupport (IBU)
• Field Service (CSF )

4) Forecast to Plan

Under this Business Process Oracle module can be potentially used as

• Material Planning (MRP)
• Advanced Supply Chain Planning (ASCP)
• Collaborative Planning

5) Demand to Build

Under this Business Process Oracle module can be potentially used as

• Demand Planning (MSD)
• Bills of Material (BOM)
• Work in Process (WIP)
• Cost Management (CST)
• Flow Manufacturing (FLM )