Embrace Supply Chain Management before you fully understand what’s needed to make it work, and you could end up putting your company at serious risk. SCM is not a quick fix for bloated inventory costs. It’s expensive to implement, requires extensive employee training, and any disruption in a lean supply chain may have you wishing you hedged your bets and kept a larger inventory.
SCM connects with Just-In-Time inventory to increase efficiency and decrease waste in modern industry. But implementing SCM takes extensive planning and training, often more than a company anticipates. For the system to work, companies that are part of the supply chain must complete the training before implementing an SCM system. A company’s SCM implementation can fail because of a lack of sufficient training for employees and a lack of understanding by management of how complicated implementation can be. The expense of training and implementation also can cause top management to give less than full commitment to SCM in an attempt to save money, which can reduce or eliminate its bottom line impact.
SCM depends on supply chain management software, but too often different parts of the supply chain are working on different software programs, preventing a seamless integration.
The software is meant to forecast parts distribution needs, but if the information entered isn’t accurate, neither is the forecast. The system also can be plagued by employees bypassing the SCM system to manually manage ordering and inventory with fax machines and spreadsheets. If the training isn’t enough to make employees comfortable using the system, then the system only gives an incomplete picture of a supply chain’s status.
Enterprise resource planning software is meant to integrate all of the company’s information into a single application, which benefits SCM applications by having a single source for up-to-date information. ERP software, however, is expensive and difficult to implement as well.
A 10-year research project conducted at Australia’s University of Melbourne discovered that supply chain integration clearly benefited successful businesses, yet its adoption was not widespread. Adoption occurred more in response to short-term pressures rather than as a result of strategic planning and long-term goals. The report concluded that implementation of supply chain management “often lacks cohesion, strategy and forward thinking. Instead, managers focus on local, short-term business benefits for their own organization, rather than on strategic supply chain integration."
Supply chains are lean by design. Larger inventories were more expensive to house, but they did create a buffer for unexpected events. If surprise demand for a product occurs due to an unpredictable trend, a supplier could run out of stock of a vital part, resulting in production delays and wasted resources as a manufacturer waits on a supplier or attempts to find a new one.
More unexpected, and with greater negative impact, would be natural disasters including earthquakes and hurricanes, labor strikes, or terrorist attacks that could instantly cut the supply chain. Without sufficient contingency planing, a natural or man-made disaster would be an economic disaster for the last link in the chain.