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Building a supply chain integration strategy

Tight integration between supply chain management and other manufacturing IT systems is a must-have.

Whether you are a manufacturer, distributor or service provider, every organization has a supply chain that needs to be managed. For many, the overall benefit of supply chain management software (SCM) is not difficult to understand. However, considering all the business processes that comprise the supply chain and the numerous SCM tools available, the basic question is where to start. The following are the critical first steps that manufacturers should take to create a supply chain integration plan and avoid wasting time and money along the way.

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A prerequisite for managing the supply chain is having a core ERP system that provides functionality for demand management, sales order processing, production planning, procurement, shop floor execution and shipping. ERP systems can provide the integration and software capabilities to address these internal supply chain processes.

If there are currently many islands of automation within your business or your ERP system lacks important capabilities in these areas, consider implementing a new integrated ERP solution or acquiring additional functionality to fill the gaps.

For example, if the sales forecast is currently performed in a spreadsheet, most ERP vendors offer a forecasting module that is integrated with their order promising and planning systems. Also, if the existing production scheduling or distribution software is inadequate, consider more advanced supply chain capabilities offered by your ERP vendor or a third-party bolt-on application. The answers for multi-site manufacturers may include advanced planning systems (APS), more robust warehouse management systems (WMS) or distribution requirements planning (DRP). Again, the key is to shore up internal systems and processes first.

Understanding customer and supplier disconnects

Perhaps the most difficult part of developing a supply chain integration strategy is understanding the information disconnects and inefficiencies within processes that directly interact the customers and suppliers. Typically, these touch points must be better understood in order to identify the hidden costs and opportunities and to prioritize supply chain initiatives. At times, this requires working with customers and suppliers to address their needs and to understand their technology capabilities.

The software solutions in this area may or may not be available within your particular ERP system or from your ERP vendor. However, there are many third-party providers that focus exclusively on ecommerce or other SCM solutions. This list includes electronic data interchange (EDI), with dozens of transaction sets available; transportation management packages; third-party logistics support; customer or supplier portals; data base services for standardization and sharing of item information and online tools for partner collaboration during product design.

Clearly, there are many potential SCM software tools. Without a proactive and more holistic approach, many companies find themselves simply reacting to customer and supplier supply chain demands. This can result in sub-optimization within the business and necessitate the development of many complex system interfaces prior to supply chain integration.

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This was last published in May 2013

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