SCM to increase ROI
Saturday, 18 October 2008
Abdul Majid Khan
EFFICIENT Supply Chain Management (SCM) can play a vital role in increasing the return on investment (ROI). It involves the series of business process, i.e., planning, design, and control of the flow of information and materials along the supply chain in order to meet end user's requirements in an efficient manner. Its performance depends on cost, quality, flexibility and delivery, the percentage of orders delivered complete and on the date requested by the customer, since orders are not counted as delivered on time when only part of the order is filled or when the customer does not get the delivery on the requested date. In our business perspective, efficient SCM is not widely used due to lack of necessary knowledge of IT.
But such a situation should not exist, since business should cope with upgraded process of SCM where maximum ROI has to be achieved.
Sometimes information can lead to fluctuation in orders and in efficient movement of materials. It is very important to manage this chain effectively and efficiently which has significant impact on return or profit on investment (ROI). To increase ROI with the help of SCM, a company can initiate a cross-functional team within the company. Their purpose is to provide synchronisation that is missing across the various departments and functions of a business. A cross-functional team is repeatedly used to plan and control the schedule for manufacturing as per requirement. The team consists of representatives from marketing/ sales, production, human resources, and accounting/ finance.
The team develops a system to predict further expected orders, plans the capacity of manufacturing, schedules customer orders and their delivery.
Another attribute of supply chain management is visibility where information sharing between different parties of supply chain is achievable, helping to team up about planning in the main as well as minor processes. Supply Chain Planning confirms immediate information sharing and consequently it is possible to provide management teamwork among different parties of supply chain management. Information sharing not only eliminates the "silo effect" when information is not shared, but also provides additional financial gain by allocating economic resource more efficiently, for instance, zero inventory level and streamlines the process of order, build and delivery. Therefore, by providing visibility within the supply chain, suppliers no longer need to guess how much raw materials to order and manufacturers do not have to order more than what they need from suppliers to ensure that enough raw materials are in hand in case future demand grows unexpectedly. Similarly, retailers do not have empty shelves or excess stocks if they share their sales information with manufacturers. Resultantly, it increases ROI.
Sharing information with manufacturers and retailers is very important where internet is an important tool that provides specific guidelines for knowing, if products match clients' requirement. Automation and computerised system of SCM is now being widely introduced that emphasise cost reduction, delivery and recording of the same properly. Computerised business data exchange within the supply chain means for instance, automatic invoicing, order processing and payments. As a result, businesses can save time, reduce processing costs. It also reduces inventory size and human error in data processing.
Business automation introduced by SCM helps save time and money substantially, while ensuring quality goods and services are delivered through supply chain with speed and without any errors. Now, we are observing automated supply chain management at the Chittagong port, which may play a significant role in enabling export and import to operate in full swing. This would also help increase revenue collection.
Therefore, a business world with no warehouses, no inventory and no paper invoice could be achieved with SCM, which would subsequently increase ROI.
EFFICIENT Supply Chain Management (SCM) can play a vital role in increasing the return on investment (ROI). It involves the series of business process, i.e., planning, design, and control of the flow of information and materials along the supply chain in order to meet end user's requirements in an efficient manner. Its performance depends on cost, quality, flexibility and delivery, the percentage of orders delivered complete and on the date requested by the customer, since orders are not counted as delivered on time when only part of the order is filled or when the customer does not get the delivery on the requested date. In our business perspective, efficient SCM is not widely used due to lack of necessary knowledge of IT.
But such a situation should not exist, since business should cope with upgraded process of SCM where maximum ROI has to be achieved.
Sometimes information can lead to fluctuation in orders and in efficient movement of materials. It is very important to manage this chain effectively and efficiently which has significant impact on return or profit on investment (ROI). To increase ROI with the help of SCM, a company can initiate a cross-functional team within the company. Their purpose is to provide synchronisation that is missing across the various departments and functions of a business. A cross-functional team is repeatedly used to plan and control the schedule for manufacturing as per requirement. The team consists of representatives from marketing/ sales, production, human resources, and accounting/ finance.
The team develops a system to predict further expected orders, plans the capacity of manufacturing, schedules customer orders and their delivery.
Another attribute of supply chain management is visibility where information sharing between different parties of supply chain is achievable, helping to team up about planning in the main as well as minor processes. Supply Chain Planning confirms immediate information sharing and consequently it is possible to provide management teamwork among different parties of supply chain management. Information sharing not only eliminates the "silo effect" when information is not shared, but also provides additional financial gain by allocating economic resource more efficiently, for instance, zero inventory level and streamlines the process of order, build and delivery. Therefore, by providing visibility within the supply chain, suppliers no longer need to guess how much raw materials to order and manufacturers do not have to order more than what they need from suppliers to ensure that enough raw materials are in hand in case future demand grows unexpectedly. Similarly, retailers do not have empty shelves or excess stocks if they share their sales information with manufacturers. Resultantly, it increases ROI.
Sharing information with manufacturers and retailers is very important where internet is an important tool that provides specific guidelines for knowing, if products match clients' requirement. Automation and computerised system of SCM is now being widely introduced that emphasise cost reduction, delivery and recording of the same properly. Computerised business data exchange within the supply chain means for instance, automatic invoicing, order processing and payments. As a result, businesses can save time, reduce processing costs. It also reduces inventory size and human error in data processing.
Business automation introduced by SCM helps save time and money substantially, while ensuring quality goods and services are delivered through supply chain with speed and without any errors. Now, we are observing automated supply chain management at the Chittagong port, which may play a significant role in enabling export and import to operate in full swing. This would also help increase revenue collection.
Therefore, a business world with no warehouses, no inventory and no paper invoice could be achieved with SCM, which would subsequently increase ROI.