Supply chain management has improved exponentially since the days of being dependent on one or two regional suppliers for raw materials and renting billboard space to advertise the subsequent wares. In fact, over the past few years, it has become possible to explore worldwide supply stocks, acquire the necessary materials and have them on the way in a matter of minutes. Coordinating all the activities necessary for getting a product built and subsequently shipping it on to distributors happens within a very short period of time. Supply chain software has become so sophisticated that it can accomplish all of the previously complex negotiations and interactions between suppliers, manufacturers, distributors and buyers in a fraction of thetime that it took only a few years ago. Basic supply chain management can be broken down into four relatively simple steps: planning, sourcing, building, and delivering a product.
There are still some drawbacks to most supply chain software. Since typically, numerous unrelated software suppliers have developed it independently, it may not function uniformly across all platforms and does not always integrate well with competing software. Two basic types of supply chain software are available on todays market, software that performs supply chain planning functions, and software that executes supply chain functions. Most distributors are largely interested in the latter variety - software that electronically routes the product from suppliers to the distributor and on to the customer.
Using supply chain software, a distributor can work with numerous manufacturers, all at the same time, viewing and ordering their goods online. Supply chain networks simplify that process even further. Distributors who join a network have the capability of acquiring product at nearly any time, simply by communicating with the rest of the network - all of which is engaged in the purchase and routing of the same, or similar, product. This type of system has been particularly successful in the consumer packaged goods, high technology and automotive industries.
When supply chain software works as it is designed to do, it reduces much of the guessing game for distributors. It eliminates the need to warehouse large stocks of product, because the supply is always readily available, even when demand rises unexpectedly. Goods are always locatable, shipping is expedited, and inventory functions are performed electronically. In the case of some of the countrys consumer good giants, the system works so well that the retailers computers automatically notify the manufacturer when product stocks are running low in the warehouse, with the system even extending to the individual stores of retail chains. Messages are sent to the factory when items in individual stores are purchased and scanned, triggering the inventory system to track and order more. The reduced necessity for keeping a well stocked warehouse and the optimized order-processing costs result in efficiency throughout the entire system and low prices for consumers.
The primary downside, in some industries, has been that manufacturers and distributors are unwilling to enter into the type of collaboration that makes the system work. The traditional way of doing business, in which manufacturers and distributors were inclined to be a bit cagey about how much product they had available and where, does not lend itself well to the transparency necessary to making a supply chain network operate at peak efficiency. Hence, there is less room for bartering and negotiations. Collaboration requires open systems in which most people can view what others are doing online.