The Berlin Wall all over again?

 In 1990 the biggest barrier within human society, the Berlin Wall, came crashing down. This was not however the only man-made barrier we have come to know. Historically our businesses have maintained slightly less visible but more costly barriers between departments and even between our businesses. Almost every magazine today contains an article about Enterprise Resource Planning (ERP) or some other acronym that describes how we should enjoin our departments using new technology to work toward corporate goals. Taking a wider view we can see that we deliberately maintained barriers between businesses, so inter and intra-organisational communication was limited (Figure 1).

Figure 1: Barriers in place to protect our departments and businesses?

 In Figure 1 you can see how each business within a typical supply chain was isolated due to barriers. Execution is the physical movement of product within the supply chain, normally associated with Order Processing, Inventory Control, Manufacturing and so on.

In looking beyond the parochial methodologies of the manufacturing process there is a greater move in the market place. Beyond the confines of the traditional business process there is a movement that is trying to achieve a level of integration that has hitherto been unrealisable: this vision is called Supply Chain Management. Being part of an integrated supply chain means realizing those traditional benefits that have previously been achieved by only a few companies; reduced cycle time; reduced cost; increased service level etc.

But to achieve these benefits we have to take a wider view of how we do business; it is not good enough simply to focus on the manufacturing enterprise. Supply Chain Management (SCM) is not a new concept, nor a new acronym. It is the process that integrates all the facets of the isolated ERP and MES systems. The reason why I say isolated is that since the days of MRP we have been focusing on our manufacturing process and our immediate suppliers. We need to take the wider view of including our Customer in the process of improvement.

Success today cannot be found only in effective ERP systems, but in integrated supply chain systems. Beyond our Sales and Marketing Departments there is a Customer. Beyond this Customer there may be another Customer and so on. In the 1970’s the focus was on optimizing functional goals. During the 1980’s the focus shifted to the optimizing of a business, or more recently the enterprise goals. Today the focus has reached the supply chain: the complete chain linking the end-customer to the raw material supplier. This is achieved through the elimination of the barriers! (Figure 2).

Figure 2: Breaking down the barriers


Figure 2: The future of SCM shows us that we can eliminate the barriers between our business to better provide for the sharing of information - the planning component shown above.

What does SCM mean? Conceptually it is the management of the flow of products, services, and information through a value-added network with the goal to meet and exceed customer expectations. This goal is not new. However we are all trying to achieve this with our MRPII systems, with JIT, OPT, CIM, ERP and so on. The move to Supply Chain Management has highlighted two new components in this mix: planning and technology.

Planning is the process of recognizing and anticipating the customers need and ensuring that the product and/or service is in the right place at the right time etc. This requires an understanding of what forecasting can and should do for your organisation. It is a recognition that we focus the forecasting efforts at the level of the supply chain nearest the end-consumer; the coal-face. Using techniques such as Distribution Requirements Planning (DRP) and Vendor Managed Inventory (VMI) throughout the remaining supply chain we can better focus our customers and our suppliers inventory investment.

No longer will we forecast at every level of the Supply Chain - we soon will do it once - at the coal-face - and then share the necessary information throughout the remaining levels of the Supply Chain using DRP and VMI. Within Supply Chain Management all business are integrated. This implies a distribution of information as well as product! The network of distribution may be vertical or horizontal - it is still distribution, and DRP is the tool that provides for the time-phasing of inventory replenishments throughout the whole supply chain.

The focus of many processes today is horizontal; meaning that departments within a business need to be better coordinated. Some processes, such as Customer Oriented Manufacturing Management Systems (COMMS) and ERP go beyond this and tie together the processes of a whole enterprise. But this last point has limited vertical opportunity. Supply Chain Management goes that one step further and ties together the all the businesses involved in the supply chain (Figure 3).

Figure 3: Supply Chain Management; All this and more....

 Above you see a pictorial view of where the boundaries of each methodology and/or philosophy lay. If you have a more complex supply chain, or indeed have more levels, the key point to note is that SCM is the process of tying all of these together.

In terms of technology and technology terms we can all admit that we have been bombarded with an increased rate of change: Client/Server; relational database; Object Orientation; GUI’s and so on. EDI is a another of these tools that has been around for many years and is still today described as a "great technology wasted". This is because it is mainly used to pass information on to a third party regarding a decision already taken, and not to share information that could be used to take that decision.

Supply Chain Management recognises all the activities that are taking place at each level of the supply chain. At the business level this might include MRPII for manufacturing and Zero-Inventory techniques for distribution. At the enterprise level this might include JIT for quality, COMMS and ERP for philosophies and business models. Supply Chain Management includes all of these and more. It derives its focus from the supply chain model - a view of how the whole should work, taken from a holistic viewpoint. Supply Chain Management is the ‘bigger picture’ of coordinating all of these activities in order to ensure that you and your ultimate customer and supplier remain in business together.

The barriers that have been present for so long within and without our organisations are taking a timely battering. The winners in this race recognise the trends that are all too visible. They are taking active steps to remove the barriers themselves, through the development of tighter relationships with their customers, their customers customer, and their suppliers etc. Those that remain in second place will not have to wait long for their own barriers are run over by the weight of competition. I only hope that those organisations are not toppled along with their barriers.

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