ARTICLE TABLE OF CONTENTS
This is about the primary users of SCM (Supply Chain Management) systems.
You’ll learn:
- What a SCM system is
- Who the primary users of SCM systems are
- Lots more
So if you want to know this SCM basic, then you’ve come to the right place.
Let’s get started!
The Primary Users of SCM Systems
You may have heard of the supply chain, but what goes into the successful operation of one is complicated and involved.
To issue a product through its life cycle, companies often utilize software called supply chain management systems.
Who are the primary users of SCM systems?
It’s time to find out:
What Is Supply Chain Management?
Supply chain management (without the system) is the monitoring and, of course, management of every piece of a product going from its creation to being in the consumer’s hands. This management is an intricate structure that requires attention to detail on a small and large-scale level.
It deals with the acquisition and processing of raw materials, individuals from factory workers to drivers, designing and printing labels and packaging, and every other detail you can think of that goes into a product.
This path of an item is called the supply chain, and every product has one.
The price of an individual item is not equivalent to the profit that its creator receives.
An item may only procure a profit equal to 5% of what the item is sold for and rarely goes above 20%.
The company utilizes the rest of this money to pay for all the expenses the item’s production procures.
What’s Involved in Supply Chain Management?
As the name implies, this process involves managing every detail of the supply chain. Large businesses, especially ones with brick and mortar locations, have a long and complicated supply chain.
Think of something simple, like an apple you buy at big chain grocery stores:
- Where did that apple grow?
- Who planted it?
- Who tended to it?
- Who harvested it?
- Who transported it from the farm to a distribution warehouse?
- What did a driver need to transport it?
Six questions still don’t cover half of the labor that goes into transporting an apple to a grocery store.
You can see why a company only earns between 5% and 20% profit in average.
Everything mentioned in those six questions costs money.
If you think of a small business, like a local farm, the supply chain is smaller and simpler.
There’s usually one or a few people who buy seeds (or procure them from their produce) and bring them through their stages until they sell them in a roadside stand.
What Is a Supply Chain Management System?
Put the small farm from above aside for a moment. Think of a large business.
A large corporation, for example, needs a way to organize the management of the supply chain. In other words, it’s a lot of management.
The business world has exploded over the last few decades in the sense that consumers expect more products and for them to go farther, across land and sea, more than ever before.
The digitation of society both solves issues in commerce as well as causes them.
A company needs computers to keep up with consumers. Computers and the internet provide you with access to thousands of pieces of information that are relevant and important to companies that make products.
But none of that information means anything until it’s stitched together to create meaning.
That’s where supply chain management (SCM) systems come in. They are systems, often in the form of software products, that allow companies to meaningfully organize, dissect, and utilize information about their supply chain.
What Do These Supply Chain Management Systems Do?
Remember those six questions that didn’t cover even half of the supply chain process? Well, a supply chain management system does cover those questions and more, as well as all the answers to them.
In general, the systems allow you to manage three main flows:
- Product flow
- Information flow
- Financial flow
Some systems focus on planning, attempting to construct a method that best gets a product from procurement to its end location.
Other systems focus on execution, which can monitor products as they are in transit or other real-time statuses.
Supply chain management systems can be involved in and of themselves, connecting with other tools like scanners and cameras across nations to allocate all information into one location.
What Are Some Examples of SCM Systems?
Many supply chain management systems exist on the market, some being much more widely used and established than others. They vary in features but generally, all seek to aid in the same goal: Managing a company’s products in the supply chain.
Two big names in the business are SAP and Oracle. Each of these companies creates other software, like SAP’s HANA product or Oracle’s Database, but also SCM Systems.
Supply chain management systems from any brand can be complicated and intricate tools, usually requiring at least some degree of training. They tend to be expensive, especially when aimed at large corporations who require elaborate schemes to manage all of their data.
Regardless of what brand or company one might get their supply chain management system from, the methodology behind managing supply chain products is often similar and not affected by the software chosen to execute it.
In a supply chain management system, you’re likely to find a recurring cast of characters (or roles) that play into its operation.
Who Are the Primary Users of SCM Systems?
The aforementioned recurring cast of characters in a Supply Chain Management System is as follows:
- Customers
- Resellers
- Partners
- Suppliers
- Distributors
Individually, you probably know what each of these words means, or can at least guess.
However, in a supply chain management system, they equate to particular participants in the chain, each requiring specialized attention so that the supply chain can succeed.
The roles often form a ladder, though some are labels or statuses for one relationship.
Whatever their relationship to each other is, they each formulate a vital role in the supply chain, and software systems help keep track of each of them.
The Goal: Customers
Let’s start with the goal:
The aim of any company in their labors and toilings is to get a sellable product to a customer, who then buys it and completes the product’s life cycle in the supply chain.
However, customers are not just everyday people who go shopping in a store.
In the largeness of the supply chain, a customer can be someone who purchases a product. They can either use alongside or within another product.
It’s time to return to the apples. A farm, large or small, must have seeds to grow apples. If you assume that a certain farm does not procure their seeds but instead purchases them, then the apple grower is a customer.
The apple grower does not buy and eat the apples for themselves to enjoy, but they purchase the seeds needed to create a secondary product.
The Homestretch: Resellers
Another stop on a product’s supply chain journey is a reseller.
The term reseller may be slightly less familiar to you, but you’re likely to recognize their other name: Retailers. You can probably name a dozen of these. It may be harder to name a store that’s not a retailer.
Resellers don’t manufacture their products but rather curate a selection of products that they buy in designated amounts to pass onto the general public.
Big chains like Wal-Mart, Target, Amazon, and even fast-food restaurants like McDonald’s are all resellers.
While some stores like Wal-Mart and Giant have their brands of items that are exclusive to them, this still doesn’t exclude them from their retail status.
A retail company can be a customer in its way, though unlike a regular customer who ends the supply chain line, resellers are one more step in a product’s life cycle.
The Long-Term Aids: Partners
A partner is less of a unique participant and more of a label for involved participants, and one that SCM systems recognize.
When two parties, usually a buyer and a supplier, engage in a long-term relationship, they are designated as partners.
Any interaction a company has with another company requires the exchange of information, transport of products, the interaction of personnel, etc. But with an official partner, some of these interactions may differ from a one-off deal.
As such, you may want your supply chain management system to acknowledge these people or companies uniquely from single-interaction parties.
Labeling a company as a partner allows catering to those certain companies to comply with their needs. If both of the involved companies are large enough, software systems are a good way to track that.
The Occasional Creators: Suppliers
A supplier supplies products. This may not surprise you.
A supplier can be a manufacturer, or they just supply goods.
There can be some confusion between suppliers, manufacturers, and our next role, distributors. So, to break it down:
You’ve likely heard that a rectangle is sometimes a square, but a square is always a rectangle. The same goes for a supplier sometimes being a manufacturer, but a manufacturer is always a supplier. A manufacturer creates a supply and, by default, becomes a supplier.
For example, the video game company Nintendo is a supplier of video games that also manufactures them. They supply a distributor, such as Vast Inc., with their video games who, in turn, distributes it to retail stores like Gamestop and Amazon.
Sometimes, a supplier is a middleman that doesn’t do any manufacturing, but they always supply something. These supplies almost always go to a distributor, as suppliers cannot or do not transport and distribute their products themselves.
The Backstretch: Distributors
A distributor distributes products, as you might guess. Suppliers do not do this.
Distributors get products from suppliers, be they mere suppliers or also manufacturers, and then dispense these products to resellers or retailers.
Distributors take inventory, manage products, and deliver products according to the buyer’s needs. Another term for distribution is wholesale, which you may have heard as a cheaper alternative to buying retail.
Why is it cheaper? Because it bypasses a link in the supply chain. This means going around workers that cost money, another step of transportation that costs money, as well as all the other small expenses that add up in the long run.
All of these roles or users within a supply chain management system need to keep in touch and keep track of each other’s statuses and data, which is why utilizing software systems that accomplish this are so vital to operations running successfully.
