Advantages and Disadvantages of Implementing a Supply Chain Management System
A Supply Chain Management system is an information system which integrates the primary inbound logistics business activity. Supply Chain Management system supports inbound and outbound logistics procurement as well as procurement support activities. Supply Chain Management systems support three basic processes which are source, purchase and settle; because Supply Chain Management systems support the three basic processes the process itself of the supply chain has become faster and more efficient. One advantage of implementing a supply chain management system within an organization is that it has expanded supply chain speed which is the dollar value of good exchanged in a given period of time; this allows for companies make their processes quicker and more efficient. Another advantage for implementing a Supply Chain Management is that the Supply Chain Management System enables both the supplier and the customer to reduce the size of inventories therefore reducing inventory costs which in the long run will assist the company grow because they are keeping their costs low. This reduction in inventory costs is possible because the speed and the efficiency provided by information systems enable processing of small orders fast. SCM Systems also help improve delivery scheduling this occurs because the suppliers are able to deliver materials and components at the time and sequence needed this enables just-in-time inventory which allows manufacturers to reduce raw materials and handle of raw materials. SCM Systems also are an advantage because it creates processes to achieve strategies. The SCM Systems are mainly developed for support for business processes which assist organizations achieve competitive advantage over other companies as well as helping to avoid creating systems that are unrelated to organization’s strategy. The last advantage of a SCM system is it fixes bullwhip effect which is the tendency of consumers to buy more than they would need in the immediate future.
The disadvantages to implementing a Supply Chain Management System are that it can be expensive and difficult for some employees to learn. While some employees want change and are not reluctant to modifications to their current system many other employees will resist the change; which would result in the organization having to deal with this which can drive costs of implementing such a system even higher. Another reason implementing a SCM System is a disadvantage is because for some organizations it may require them to change substantially because their current system is very basic; therefore, implementation of such a highly advanced system could change the organization considerably. If a company grows significantly, such as NIKE did, then SCM can become a hindrance because the company grows and the system could become irrelevant towards the company’s main objective. An additional drawback of implementing a SCM System is that there could be a lack of appreciation for the system just as there was for NIKE; this is based on the statement made by the Nike CIO, Gordon Steele, he thought that that this system would have been an easier solution for the problems Nike was facing but in essence it turned out to much more complicated. Another disadvantage for implementing a SCM System is that even though a company may think that they have trained their employees enough, the reality of this can be that there is never enough training available, which Nike’s CIO stated again.
Options for Acquiring a SCM System
Companies must first acknowledge that there is a problem with their organizational system. In the case, Nike sensed that there was an issue with their current business model in that it focused on centralization but increasingly became more and more decentralized. Its only option was to acquire a SCM system to create greater supply chain visibility.
They were to find vendors by shopping around for SCM systems and the organizations
that program them. So they had to search for information on how to solve their problem. Nike
understood that they had to quickly and accurately analyze the impacts of proposed SCM .
Business should use information to evaluate alternative brands in the choice set and
assess the capabilities of each. Negotiation of the terms and conditions would follow. The
purchase decision follows and the business decides to buy the program. Nike addressed this
issue by implementing SAP ERP in conjunction with i2 software to be its information system.
The final step is the post purchase evaluation in which the company takes further action after the purchase based on their satisfaction or dissatisfaction. The advantages of each option:
Reduce costs of buying and selling, increases supply chain speed, reduces size and cost of
inventories, and improves delivery scheduling. This disintermediation that occurs when
eliminating the middle layers in the supply chain will increase market efficiency. The
disadvantages of each option: Technology and user training.
Raw Material Purchasing Process
In order for there to even be a raw material purchasing process there must be a supply chain for which the raw materials get transferred through. A supply chain is considered a network of organizations/facilities that transform raw materials into products delivered to customers. The main purpose of a raw material purchasing process is for a company to be able to successfully transfer raw materials into intermediate goods which can then be transferred to finals good and delivered to the customer; this is all done to ensure that the customer gets the service as efficiently and prompt as possible. The processes itself is started once the customer
realizes that there is a need or want for a product. The customer then places an order for their service through the retailer. The retailers then in-return must order from the distributors that would dispense to the retailers. The distributers are then required to order from the manufactures that develop or create the product but in order for the distributers to develop or create the product they have to order the supplies from the suppliers that they receive their materials from. The suppliers are the ones with the original raw material. Once the supply chain is complete from the
customer’s realization up to the suppliers being notified of the raw material being needed all
items are delivered and the supplier’s payment goes through the same process; retailers get paid
by customer the retailers pay the distributors distributors pay manufactures-manufactures
Potential Pitfalls in Implementing a SCM System
The increasing outsourcing that occurs is one of the potential pitfalls that may be
Encountered when implementing a supply chain management system. Shrinking product
lifecycles, intensifying economic pressures, and constant changes in supply, demand, and product make supply chain optimization harder than ever. Existing systems generate plans that become obsolete the moment they’re finished, while spreadsheets and ad hoc databases lack the visibility and collaborative capabilities organizations need to swiftly and effectively monitor and respond to change.
Another downfall encountered is that user training must be administered and completed before implementing a supply chain management system.
Major Tasks that need to be Completed
Evidently Nike has not spent enough time and effort in implementing their supply chain process to coincide with the organization. Which is why they now must purchase a new SCM system, but before implementing this new system, major tasks must be done in order for it to work efficiently. A successful SCM System requires a change from managing individual functions to integrating activities into key supply chain processes. Supply Chain Management entails coordination and configuration of the process that is necessary to make products available in a timely, reproducible and pleasing manner.
Nike must first come up with a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big part in Supply Chain Management, that Nike failed to strive in, is monitoring the supply chain so that it is efficient, costs less and delivers high quality and value to customers. As Nike grew and times changed, their central control became more centralized leading them to 27 different order managements systems worldwide. This clearly has led to their downfall, and evidently Nike must look over and choose suppliers to deliver the goods and services they need to create their product. Supply chain managers must develop a set of pricing, delivery and payment processes with suppliers if not satisfied with the original and also create a better system for monitoring and improving their relationships.
The manufacturing step is most important because this is when supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. Nike must develop a proper procurement process, this is important because Nike extends globally. This is the process of strategic plans made with suppliers to support the manufacturing flow management process and the development of new products. Procurement delivers the
responsibility for assuring the quality of purchased raw material/services and linking supplier operations to distribution through manufacturing activities. This step allows for measurement of quality levels, production output and worker productivity. Nike must ensure that the manufacturing processes are flexible to respond to market changes and accommodate mass customization. The product development and commercialization must be looked at as well because it is such a lengthy task.
Customers and suppliers must be combined into the product development process in order to reduce time to market because the appropriate products must be developed and successfully launched with shorter time-schedules to remain competitive. If Nike is to attain competitive advantage, then their ultimate aim should be to achieve supply chain excellence before their competitors do.
What Nike realized, later than other companies, is that the most important assets to an organization are their employees and consumers. Steele quotes “You can never train enough” which is only the truth. To ensure that this new system is successful the employees must all need to know how to use work with the system. Hence this is why Nike has now made training an important part of business. As important is the customer service management process; an organization that strives to be successful should use the following steps to build customer relationships: determine mutually satisfying goals for organization/customers establish and maintain customer relationship, and produce positive feelings in the organization and the customers. We all know companies like Nike exist to serve their consumers; hence they must find a clear and concise way of knowing exactly what their consumers want and passing that information through the supply chain to the suppliers correctly.