What is SCM Software?
Supply Chain Management software is used in the management of all supply chain transactions, supplier relations and control of all other directly related business processes. It aims at predicting outcomes to enable better planning and solving of disparities between supply and demand. Most firms make use of this software to carry out supply chain transactions electronically. Some companies also use additional software that links the supply chain with the finance and sales departments to ease, or maximize, the process of SCM.
History of Supply Chain Management
In the 18th century, the cost of transportation of goods to the final consumer was the main determinant of production and distribution of products. The technology that was used then was basic. Goods were transported in a linear chain to the consumers. Back then, production and consumption of many goods were local, implying that the buyer and the seller could interact with each other. Since, then, there have been transformations in production and consumption of goods.
Fredrick Taylor in his work of 1911 ‘The Principles of Scientific Management’ focused on manual loading which was the basis for logistics. Use of SCM can be traced back to World War II when the heavy investment was required to carry out military logistics. In the 1940’s and 1950’s, logistics research focused on mechanization which mainly encouraged better warehousing to create more storage space and layout. Logistics advocated for use of pallets to manage space and organize goods during that time. The use of pallets became widespread and in the mid-1950’s, the concept was extended to the management of transportation of goods. Containers were then developed to ease transportation in ships, trucks and trains. By the 1960’s people had shifted to freight transportation to the truck instead of rail. The shift leads to the formation of the National Council of Physical Distribution Management in 1963. The organization’s main function was to manage warehousing, freight transportation and handling of goods.
The field of logistics became even more popular with increased learning and use of computers in between the 1960’s and the 1970’s. It is during the 1960’s when the first SCM software of Electronic Data Interchange (EDI) was introduced. Before computers were invented, most business processes were carried out manually. The work was tedious and would often lead to errors. However, computers were used to store data regarding inventory. The data was then used for truck routing. The research that had previously been carried out was now being transitioned into practical use despite the fact that challenges kept hindering the process. Georgia Tech of the Production and Distribution Research Center, the Material Handling Research Center and the Computational Research Center were created in the 1970’s to look into all the challenges involved in the supply chain and how each of the problems could be solved.
EDI systems were introduced to help connect computers from various companies such that customers would communicate easily with suppliers. EDI was mainly used in the automotive industry. Today, EDI systems have been improved and they form the standard for most companies in the world as a tool of exchanging electronic documents and enhancing supply chain. EDI systems, however, did not have a breakthrough without some challenges. For instance, the systems were introduced at a time when people were learning about computers. Not everyone could afford a computer and of course, not everyone was ready to embrace them. Companies also had to spend a lot of money to integrate their systems with the software. Staff had to be trained on how to use EDI to ensure its effectiveness.
Supply Chain Management in Practice
The 1980’s marked a major evolution in supply chain management because personal computers were invented then. Executors of SCM now had better access to computers implying that they could now put into practice software that would ease the process of distribution. Computers enabled them to use spreadsheets and other applications that hugely improved the field. The Production and Distribution Center pioneered the creation of map interfaces and combining them with optimization models that eased the process of distribution planning. The Material Handling Research Center created a control technology that automated good handling. The Computational Optimization Center developed optimization algorithms that eased the process of airline scheduling.
The 1980’s marked a period when companies now started acknowledging the need to invest in trained personnel and use of better logistics plans. The process was undeniably complex and expensive because it involved the purchase of computers and training the staff on how to make use of them.
In 1985, the National Council of Physical Distribution Management changed its name to the Council of Logistics Management (CLM). The name was changed to accommodate the evolution of the industry to involve the process of integration of services to allow for a smooth flow of goods from the supplier to the final consumer.
Amazon has been a key player in the use of SCM software for its logistics especially in the delivery and collection of goods from one point to another. We all know that a sound system should be applied to allow you to place your order, sync with payment and be in a position to track your order until it is delivered. Amazon makes use of ERP system for its accounting functions. The company also has a platform that allows customer relation management (CRM), EDI and e-commerce to interact. The company also has a cloud application that allows data management and archiving.
Evolution of Technology in SCM
In the 1990’s, the Enterprise Resource Planning Systems (ERP) was developed as a predecessor to the EDI systems. ERP helped integrate most databases in firms that did not interact with each other previously. The integration led to accuracy and data availability within various departments in companies. By the year 2000, most firms had adopted the ERP system which then led to the need for better system integration among various logistics mechanism. Advanced Planning and Scheduling (APS) Software was then created to solve the need for better logistics system.
Globalization of SCM
Supply chain management became global in the mid-1990’s with the increase in manufacturing industries. It is also during the mid-1990’s that countries started importation and exportation of products. Globalization of SCM practices created the need for companies to track their goods while on transit because transactions now involved more parties with diverse practices. However, with time, a distinction has been made between logistics and supply chain management. Logistics is referred to as a part of supply chain management that involves clearing and forwarding of goods from the point of origin until they reach to the final consumer. Supply chain management is then defined as the systemic and strategic coordination of business practices within a particular firm and among businesses to ensure long-term performance of the individual firms and the supply chain in totality. It is because of the distinction in meaning that the Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals in the year 2005.
The future of supply chain management is expected to have many improvements due to technological innovations eminent in the 21st century. However, the expected changes and automation of business processes have their foundation traced from World War II when logistics was widely used by the military during the war. Supply chain management has witnessed the development of software such as ERP and APS that have integrated various components of SCM leading to better access to data and availability. All technological innovations in SCM are aimed at easing the process of supply and distribution to enable tracking till the final consumer gets the product.