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What is SCM (Supply Chain Management)? Benefits and case studies

Many people may have heard the term SCM (Supply Chain Management).
Currently, the introduction of SCM is progressing mainly in major companies. This time, we will introduce the basic information of SCM, the background that attracts attention, and application examples.

Table of contents

  • 1. What is SCM (Supply Chain Management)?
  • 2. Difference between SCM and ERP
  • 3. Background to Supply Chain Management regaining attention
  • 4. Benefits of introducing Supply Chain Management
  • 5. Supply Chain Management use case

What is SCM (Supply Chain Management)?

“Supply chain” in SCM (Supply Chain Management) is a name that refers to a series of flows from raw material procurement, production management, distribution, and sales in the manufacturing industry. Before all products reach consumers, there are processes such as manufacturing, distribution, and sales, and many are handled by separate businesses and business divisions. Therefore, it tends to be difficult to respond flexibly to customer consumption trends. During such problems, the use of SCM is drawing attention.

SCM is an abbreviation for “supply chain management” and is often abbreviated as SCM. SCM is one of the necessary methods to understand the series of processes until the product finally reaches the customer. By introducing SCM to a company and using it properly, it is possible to eliminate the division that occurs between each process from manufacturing to sales, maintain the optimum production scale, and reduce costs.


Difference between SCM and ERP

“ERP” is often confused with SCM. This ERP is an abbreviation of “Enterprise Resource Planning” and is also called “Integrated Core Business System”.
The meaning of ERP is a plan to make the best use of corporate resources. ERP can visualize the entire management by utilizing the data that builds a company of resources (human resources, equipment, information, funds, etc.) related to internal business. ERP centrally manages information on all such operations, visualizes management, and smoothly links and connects related operations. On the other hand, in the case of Supply Chain Management, the difference is that it is possible to visualize a series of processes in product sales both inside and outside the company.


Background to SCM regaining attention

SCM was not recently proposed. Supply Chain Management is the first business management method used by KR Oliver and MD Webber of the American consulting firm Booz Allen Hamilton inch. In the past, it has attracted attention as an excellent management strategy that will be a supply chain revolution that involves the entire industry. The background to the renewed attention of SCM is the points such as “globalization of economy and companies”, “evolution of technology”, and “change of working population”.


● Globalization of economy and companies

The reason why Supply Chain Management has regained attention is that the economy and companies have become more globalized. Economic globalization is accelerating as the development of Internet technology and numerous innovations change with the times. As a result, a global network of procurement, production, and sales has been built, international competitiveness has increased, and companies are in increasing demand for efficiency and optimization of the entire supply chain. With the globalization of the economy and companies, the need to manage the flow of “things,” “money,” and “information” throughout the supply chain is increasing, and SCM is drawing attention again. It is one of the reasons.


● Changes in the working population

In Japan, labor shortages are becoming more serious in various industries as the working population changes. For example, labor shortage due to increased use of home delivery. In Japan, the number of workers is decreasing due to the declining birthrate and aging population, and the shortage of truck drivers makes it difficult to carry and deliver goods. Therefore, we are in a state where we must fundamentally reexamine the way logistics should be. In such a changing working environment, supply chain management can be used to eliminate unnecessary logistics, purchase appropriate quantities, and optimize the timing of delivery to wholesale companies and retail stores. is.


● Technology evolution

Every day, the entire technology such as the Internet and SNS is evolving. Under such circumstances, the use of AI and big data has been increasing in recent years, and it has become possible to extract customer needs and values ​​from a huge amount of data and utilize them in business. As a result, it became an opportunity to review past SCM methods, and it can be said that the movement to further improve efficiency and optimization has accelerated. In addition, SCM can accurately predict the rapidly changing market and customer demand even in Japan and aim to reduce business risk.


Benefits of introducing SCM

● Can be effectively used for inventory optimization

One of the benefits of introducing SCM is inventory visualization. It is important to reduce excess inventory, which poses a risk to companies, by appropriately purchasing and producing from the current sales situation. By introducing SCM, it becomes possible to see the whole picture of logistics related to products, find ways to eliminate waste and optimize inventory. In this way, SCM can reduce the risk of deficit due to excess inventory by improving the efficiency of inventory management and reducing and optimizing inventory waste.


● Effective use of human resources

By performing market analysis and market forecasting with Supply Chain Management, it will be possible to respond to sudden fluctuations in demand. By using Supply Chain Management, which constantly predicts appropriate inventory, it is possible to flexibly respond to both a decrease and an increase in demand. Supply Chain Management is no longer an indispensable system for companies with short-lived products.

Also, in Supply Chain Management you can clarify what you should spend and where you should devote your human resources. So instead of blindly producing and spending money, you’ll be able to spend as much budget as you need, where you need it.


Supply Chain Management use case

An increasing number of companies are introducing SCM to realize services that integrate S sales and logistics.
As an example, we will introduce an example of Supply Chain Management utilization at Kao Corporation, which sells detergents and toiletry products. Kao has built a unique system from raw materials to manufacturing, distribution, and sales systems to optimize inventory without causing shortages for orders. We are developing demand forecasting technology to establish a system that can deliver 60 brands (1,500 products) within 24 hours after receiving an order without going through a wholesale store. As a result, it has become possible to predict customer needs that can realize the supply of products that are just right. There are other companies like Kao that have succeeded in shortening the lead time from production to sales while minimizing inventory by utilizing Supply Chain Management. How about introducing Supply Chain Management to meet the ever-changing needs of customers and the evolution of technology?

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