As Amazon continues to raise the bar, the margin of error within supply chain management gets thinner and thinner. A simple mistake could easily cost your business thousands of dollars and allow your competitors to get ahead. But thanks to supply chain management software, it’s never been easier for companies to avoid such pitfalls. Supply chain management tools and techniques make it possible for users to reduce errors and costs while optimizing the entire supply chain. Here are 13 different types of supply chain management tools that make these SCM software packages valuable to companies:
1. Shipping Status Tools: Alerts and Updates
An increasingly popular supply chain management tool, real-time alerts provide timely information on all shipping activities. Typically, large companies have high-volume supply chains with many different types of cargo shipped to customers around the country or around the world.
While these factors allow for growth, they also leave your supply chain vulnerable to more errors. Real-time updates keep you in the know, so you and other stakeholders can take action before small issues become much larger. Additionally, these alerts can be sent to your mobile device to inform you of the status of your supply chain at any time, day or night.
2. Order Processing Tools
Order processing is massively important to any supply chain, and as such, SCM software provides the tools needed to make this task easier and more efficient. These tools support all functions across order processing like sales order processing, order management, order fulfillment, billing and order to cash.
These supply chain optimization tools can automate most activities involved in order processing using EDI software and similar technology to directly capture order data. This reduces the time it would take to traditionally process an order by eliminating the need to manually generate and send POs and invoices. It also reduces the opportunity for human error since there’s no need to manually take down order information and re-enter it into a different system.
3. Lean Inventory Tools
Lean production is a concept that dates back to the 1940s, created by Toyota and inspired by Henry Ford’s just-in-time production. The idea is that companies create only what’s needed at the moment, determined by current and projected customer demand. Before lean production, manufacturers would create and house large surpluses of goods. This resulted in massive inefficiencies, wasting time and effort.
The overall goal of this practice is to optimize your production planning by cutting down on warehousing space, inventory costs and the different procedures of storing excess inventory. Lean inventory tools can provide quite a bit of return on investment for a business, decreasing the need for warehouse space and streamlining their labor force.
While lean production principles can be implemented without SCM tools, this type of supply chain management software takes efficiency to the next level. By using demand forecasts, materials planning, scheduling and supply chain simulation tools, you’re able to gain a much deeper insight into the future of your supply chain. These tools make planning production in alignment with lean manufacturing principles much easier.
4. Warehouse Management
Depending on the solution you choose, supply chain tools may also help manage the day-to-day operations within your warehouses. SCM solutions provide a wide array of warehouse management capabilities as broad or specific as your company requires. Some SCM solutions provide advanced supply chain planning tools, allowing users to handle complex logistics related to receiving, product tracking, cycle counting, route planning and more.
Moreover, warehouse management tools help manage the kitting and bundling process as well as multiple warehouse locations. This is especially helpful when you need to bundle multiple products that are kept at different warehouses.
5. Specialized Freight Handling
In addition to various shipping features, supply chain analytics tools can also incorporate different types of industry-specific freight handling functionality. For example, the evolution of cold chain logistics and new regulations concerning perishable goods has changed compliance standards. To handle this, some SCM platforms have integrated technology that can verify that those goods were kept at the proper temperature right up to the last mile of delivery. This tool is also offered by vendors as a standalone product but can be neatly integrated with a larger SCM solution.
If you ship goods in this industry, it’s imperative you implement this tool. Maintaining product quality across the supply chain will help you reduce costs associated with perished goods. This includes the cost of a recall, item disposal, legal response and more. For example, think about Chipotle’s E. coli outbreak in 2015. Stock prices still fell throughout as late as 2018, with customer reviews worse than they were during the initial outbreak. Further, a whopping 37% of customers report eating at Chipotle less often due to issues surrounding food safety.
6. Bid and Spend Tools
Sourcing and procurement are a major part of supply chain operations for many businesses. Therefore, tools that support these activities should be a top priority as well. Sophisticated tools for supply chain management can help you dig down and take a granular look at what you’re spending on each item that you take in and send out during production. Bid and spend tools also automate much of the procurement process, reducing errors and resources spent. For instance, top systems can automate the entire procure-to-pay process.
These tools can also assist you in evaluating bids from different suppliers by helping you spot opportunities for improvement. Many of today’s systems incorporate automated spend analysis to help users better understand their overall procurement processes and come up with ways to improve them. For procurement teams with many members, SCM systems allow procurement officers to set limits for employees by creating approval processes and spending limits.
7. Supplier Management
Tying in strongly with bid and spend tools, supplier management is a must-have when it comes to procurement. Along with assistive features for cost issues, supply chain management tools can also help businesses get a better understanding of how they relate to their suppliers. Supplier management tools show the history of a business partnership and how it affects the supply chain. Using supplier performance analysis, users can see how any given supplier has contributed to a business model.
With the ability to continually assess your partners’ contributions, decision makers can act more confidently to change or otherwise manage supplier relationships. Furthermore, supplier management tools often offer a workspace to perform bids, auctions and negotiations for more centralized procurement.
8. Demand Forecasting
Using analytics, today’s SCM software is capable of processing huge amounts of supply chain data in a fraction of the time it would take a team of analysts. Not only does analytics provide insight into past practices, but it can also create forecasts to predict future demand.
Based on past trends, supply chain forecasting tools help you anticipate your customers’ demand. This provides the essential information to make crucial decisions regarding production planning, labor management and supplier relationships in order to meet this demand. Without forecasts, you risk stock shortages during periods of intense demand. On the other hand, when demand is unexpectedly low, you risk running high carrying costs you could’ve avoided otherwise.
These forecasts are often communicated via dashboard reporting. For more on dashboards and reporting, see the next section.
9. Supply Chain Analytics and Reports
In addition to analyzing consumer demand and your suppliers’ performance, SCM solutions perform analyses of your data from the entire supply chain. Supply chain analysis tools allow users full visibility not just into the physical location of inventory, but also into the health and performance of the company. Analytics can provide insight into the company as a whole or into individual sectors. Demand forecasts give visibility into the popularity of certain items, whereas warehouse analysis might tell you the most efficient way to store and move that product. SCM software also allows users to analyze order processing which can uncover the source of delays and errors. Additionally, users can analyze transportation and logistical processes.
This helps decision makers understand how well carriers are performing along with patterns of delay and error. All of this visibility gives users the means to improve their processes while retiring less useful methods.
Analytics must be conveyed in the form of a report. Different solutions may offer different reporting methods, including tables, charts, dashboards and more. Dashboards are one of the most common methods, as they offer quick information as soon as a user logs into the system. Supply chain dashboard software can be configured to show the most relevant key performance indicators (KPIs) as determined by the user.
10. Collaboration Portals
In addition to providing a hub for procurement, modern supply chain monitoring tools also allow companies and their suppliers to collaborate in other ways through a designated portal. Supply chain portals can eliminate several collaboration challenges including communication issues, bottlenecks in requisition and order, and other issues.
Using portals, all parties may have access to production progress, order forecasts, product specifications, purchase orders, shipment history, schedules and more. Collaborating directly on certain documents eliminates the need for continuous emailing back and forth to get the right information and the errors commonly associated with this form of communication. Collaboration portals support full supply chain visibility, allowing both companies and their suppliers to stay up-to-date.
11. Security Features
There’s another element of SCM software that’s focused squarely on security. Data theft can cause you to lose your position in the market as well as damage your relationships with suppliers. For instance, if your demand forecasts were stolen, your competitors would then have insight into the interests and preferences of your customers. This would enable other companies more effectively to sell to your market, reducing your profit. If financial data is stolen, you may lose the trust of the parties affected such as consumers or business partners.
In order to prevent these security failures, implementing defensive features is a must. Most vendors today offer security assurances to let their clients know what efforts have been made to safeguard their information. These might include avoiding third-party vendors with low security standards, forbidding backdoor creation, aggressive patch management and response procedures in the case of a breach.
There are also security measures your company can take in order to further protect your data. For example, dashboard reporting can be restricted based on the user to ensure only approved personnel have access to certain company data. Many solutions also allow a system administrator to set file permissions. Further, you can integrate biometric devices to provide further accountability.
12. Transportation and Logistics Tools
In order to achieve a complete supply chain management solution, you need to have some sort of transportation management. Transportation and logistics tools help users manage the movement of inventory and materials from one location to the next. With an SCM solution equipped with transportation management, users can plan multi-stop trips, consolidate shipments to maximize space and plan for less than load (LTL) shipping.
In addition to planning transportation, these features help users address issues as they arise. Through inventory tracking, individuals can see when inventory is slowing down and intervene to find the cause. There are also collaborative options within transportation modules that enable all supply chain players to manage the shipping process.
13. Compliance and Auditing Tools
Consumers, now more than ever, want their products to be well-made, safe and ethical. Thankfully, today’s SCM software gives users the means to adhere to both environmental and ethical regulations with ease. For instance, some solutions allow users to closely inspect suppliers to ensure minerals obtained are conflict-free.
Auditing tools make it easier for your business to remain transparent during third-party investigations. These inclusions may collect and store data related to relevant policies and regulations.
We’ve got the top tools nailed down, but it’s worth mentioning that supply chains come in different types with their own management styles.
Different Types of Supply Chains
Supply chains are the lifeblood of countless industries across the globe, and they each require different strategies to make them work. There are numerous methods and models that businesses subscribe to, but here are some of the most popular types of supply chains:
This type of supply chain is fairly straightforward, if not a bit risky. This method continually replenishes inventory, but requires tight coordination with suppliers, integration between your production and orderings processes, peerless demand forecasting and a constant flow of real-time information.
However, if one of these cogs in your supply chain machine is off you could be looking at costly damage control. If your demand information is off you could suddenly be the proud owner of a bunch of inventory with no place to go. If consistently replenishing your inventory involves numerous shipments the costs associated with this method could be too much to even consider.
This type of supply chain focuses on the construction of an order as soon as it is placed by the consumer or client. Dell was the first to push this strategy with its customizable PC’s that are put together and shipped as soon as the client decides on their specifications.
A dependable flow of common pieces is necessary to make this work, however. In Dell’s case, they need to have all of their computer components available and ready to be brought together as soon as they are needed. No one wants to put together a brand new PC only to see that their order is delayed for days or weeks while one particular part is ordered.
This type of supply chain involves constant coordination with third-party logistics (3PL) partners and builds a product piece-by-piece as it travels down your distribution channels. As an order parts come together across the different channels of a supply chain, they are gathered up and shipped together by your 3PL partner.
So, instead of receiving your computer monitor first, your keyboard a day or two later and then finally the PC itself nothing would ship before all the parts are ready to go.
There are numerous other methods and strategies that go into making supply chains function at maximum efficiency. Here are a few other examples of successful supply chain models:
- Agile Supply Chain: This method is perfect for businesses that deal in niche items that rise and fall with demand. The agile method is perfect for oscillating between high-demand and off periods where there isn’t much shipping going on.
- Efficient Supply Chain: Supply chains in aggressively competitive markets have to rely on efficiency to give them an edge on other businesses in their space. The efficient supply chain method focuses on end-to-end support for smooth distribution at high volume.
- Fast Supply Chain: Have popular items with short life cycles? The fast supply chain method focuses on moving numerous popular products out quickly before their temporary demand fades.
These models may get your supply chain headed down the path to success, but we also need to consider the overall management strategies that keep them running.
Different Types of Supply Chain Management
You may have a winning supply chain model in place with all of the best tools on the market, but without a proper management strategy in place you’re bound to hit an expensive snag before too long. Much like the tools and types of supply chains, there is no method that can solve the issues of every industry.
Before jumping on a particular supply chain management strategy be sure to speak to your logistics partners to find out the best way to approach streamlining your supply chain management. In the meantime, take a look at a few of the following different supply chain management methods.
Materials Logistics Management
You’re probably going to need physical goods to create the products that your customers demand. Materials logistics management (MLM) takes care of everything from planning, sourcing, procuring, building and distributing of materials with the help of 3PL partners.
Bringing in a 3PL partner isn’t absolutely necessary, but they often have connections and partnerships with other companies that can help them cut costs.
Transaction Cost Analysis
This method may come off sounding complicated, but the short version is that this helps supply chains ensure that their supplies were bought at a low price and their final products are sold high. By accessing historical data, TCA can determine when to purchase goods at the lowest prices to prepare for an upcoming influx in demand.
Basically, transaction cost analysis leverages market data to determine when products should be purchased to properly stock up at low cost before selling off when demand reaches its zenith.
Material Requirements Planning
Holding onto unnecessary components or goods can get expensive quickly, especially if your business has multiple warehouses in the mix. Material requirements planning ( MRP) discovers the minimum amount of required inventory needed to keep up production without taking up excess space.
This type of planning takes independent and dependent demand into account as well, or more simply, the demand for finished goods or component parts. Cutting down on warehouse space is a great way to reduce the costs of keeping your supply chain running smoothly.
Here are a few more methods:
- Network Perspectives: Supply chains succeed with the help of third-party partnerships. By utilizing current network connections, this method identifies potential networking opportunities the business hasn’t capitalized on yet.
- Total Quality Management: If your supply chain has multiple underperforming areas, total quality management can help you straighten them out. If end-to-end optimization is your goal, TQM identifies flagging areas for managers to strengthen.
- Requirements Chain Management: Countless supply chains rely on the expertise of 3PL partners to properly deploy and manage their supply chains. Requirements chain management has your business and your 3PL partner sit down to hammer out the specific requirements of your supply chain.
- Customer Relations Management: 3PL partners can leverage customer data to better position your supply chain to attract new customers and retain return clients. Good customer service optics are invaluable and can give you the edge over a competitor.
Now You Know the Tools and Strategies, so What’s Next?
Think about how these supply chain management tools could empower your operations in the digital age. If what you’re imagining is where you’d like to see your company in the near future, it’s high time you invested in an SCM software solution. In order to select a system with the tools your business needs most, you’ll have to create a list of requirements.
If you need help getting started, be sure to check out our supply chain management requirements template. Use it to create a checklist of features you can send to stakeholders for feedback. Careful consideration of your business needs among all parties will ensure you get the right tools to support your operations.
What SCM tool is most critical to your business operations? Are there any supply chain management techniques you can’t perform without these tools? Let us know by leaving a comment below!