SCM as a complement to MRP
Competition between enterprises forces them to use advanced methods of supply chain management and planning. The highest form of enterprise management is SCM (Supply Chain Management). Over the last decades, many management theories have emerged. One of them is Porter’s theory, which states that every process of a product’s transition from raw material through the production stage to the moment it reaches the consumer can be described by a value chain. If an enterprise uses the services of other companies, the success of its products does not depend solely on itself. To produce a high-quality product, it is necessary to be supplied with the appropriate quality and quantity of prefabricated parts.
Even when producing the best product at a low price, an enterprise may be dependent on the services of another company, its distribution, logistics, quality, and price. This can lead to a situation where a good product is poorly visible on the market and does not achieve the expected success. A solution may be for the manufacturing enterprise to take over the supply and distribution company, but attempts to implement this strategy are not very effective. In practice, supply chain management proves to be much better.
Even when producing the best product at a low price, an enterprise may be dependent on the services of another company, its distribution, logistics, quality, and price. This can lead to a situation where a good product is poorly visible on the market and does not achieve the expected success. A solution may be for the manufacturing enterprise to take over the supply and distribution company, but attempts to implement this strategy are not very effective. In practice, supply chain management proves to be much better.
It is clear that one cannot seriously consider implementing SCM applications without first implementing an ERP (Enterprise Resource Planning) system in the enterprise environment. The SCM methodology does not offer ready-made mechanisms for mathematically more efficient optimization than MRP II, and consequently, better and higher profitability. It does not constitute the next stage in the development of MRP tools, but rather complements existing ones.
Substitutes for SCM solutions are created relatively often. Usually, this is a website for communication with a business partner, used for ordering products. Not integrated with the warehouse system, it does not transmit information about the current order portfolio and does not result in improved efficiency of material management, logistics, and production. In this way, one can only achieve a questionable improvement in the product ordering process—questionable because the lack of information flow with the warehouse system often causes frustration on the part of the ordering party when they find out that they have not received the ordered product on time, even though the system reported its availability.
The implementation of SCM depends on the availability of data that allows for the optimization of the supply chain. A stably operating ERP-class system is best suited for this purpose. To a large extent, many Polish companies do not yet meet this condition. The second condition is the willingness and ability of the leader in the supply chain to familiarize other entities—participants in the chain—with the advantages of SCM solutions.
The article comes from the magazine “Logistyka” 3/2004.