Introduction:
When any developer starts working on any Supply Chain Management (SCM) Product or Application, they should not just know the technical part of it but also understand the concepts of SCM for deeper understanding.
This post will try to cover the basics of SCM and Applications involved in the Order life cycle.
As per wiki, SCM deals with the systems through which raw materials can be developed into finished products and delivered to their customers.
Let's see how these systems and players interact with each other.
Systems involved in SCM:
First, let's try to understand Order life cycle in simple words:
- Customer places an order using Order Capturing Channel
- Order is passed to Order Management System, to find an optimal Ship Node to fulfil the order based on customer's selected delivery method and delivery address
- Order is then passed to Order Fulfilment System, to Pick, Pack and Ship/Ready-To-Collect
- Order is finally Delivered to/Collected by Customer
I have tried to create a diagram which shows the interactions between the systems which are involved from the time customer places an order till they receive it.
This picture can change retailer to retailer and as per their business strategy. Now, let's go through a bit deeper into SCM concepts and some jargons:
Few Industries where SCM is commonly used:
- Retail
- Food and Beverages
- Manufacturing
- Healthcare
- Fashion
- Technology
- Defense
- Finance
Order Capturing Channels:
- These are the interfaces through which Customer interacts with Retailers and places orders
- Customer acts as a Buyer and Retailer acts as a Seller
- Various ways through which a customer can place orders:
- Store walk-in
- Website
- Mobile App
- Call Center
- Marketplace
Order Management Systems (OMS):
- OMS is probably the heart of SCM. It manages the customer order life cycle
- For retailers, customer order is called as Sales Order
- To fulfil this order, if required, retailers can in turn place either Purchase Order (order to another legal entity), or Transfer Order (order to another node within same legal entity)
- Customer can either Return the product by placing a Return Order or Exchange by placing an Exchange Order
- For add-on services like gift wrapping and post delivery services like installation are handled through Work Order
- Supply - quantity (inventory) of an item available to sell for new orders
- Demand - quantity (inventory) of an item which is blocked for already placed orders, which is yet to be fulfilled
- Retailers provide different fulfilment types for online orders like
- Same-Day
- Next-Day
- Standard-Delivery
- Express-Delivery
- Selected-Day Delivery or Name-Day Delivery
- Buy Online Pickup In Store (BOPIS) or Click and Collect (C&C)
Order Fulfilment Systems:
- These systems take care of fulfilling and delivering the orders to customers. Simply, it is defined as Pick, Pack and Ship process
- Distribution Centers (DC) - Large warehouses where companies kept their stock
- Third-Party Logistics (3PL) - Retailers can outsource their logistics operations such as warehouse management and freight transportation to these companies
- Fourth-Party Logistics (4PL) - manages all aspect of supply chain and serve as single point of contact to the client (retailer) and 3PLs
- Stores - are where customer can walk-in to buy products. It is also used for online order fulfilment, collection, return and exchanges
- Drop-Ship Vendors (DSV) - It is a 3PL that fulfills orders from a retailer (Seller) to their customers directly without the seller needing to hold any inventory
- Suppliers - Vendors from whom retailers buy their products by placing purchase orders
Supporting Applications:
- Throughout the SCM life cycle, there are many supporting applications which help the other systems to do what they are suppose to do
- Some examples are:
- Payment Gateways - They connect with Banks, Gift Cards providers, Loyalty partners to manage customer payments, so that Business doesn't have to worry about individual payment service provider integration
- Customer Relationship Applications - These applications notify customers about their order status, promotions, invoices through Email, SMS, etc
- Reporting Applications - These systems gather data from other applications (Extract-Transform-Load aka ETL) and provide insights to business about planning, forecasting, risks, concerns, etc
- Alerting and Monitoring Tools - These are used for System health monitoring, Raising alerts, Order delays, etc to make the life easier for IT and Business team
- Carrier Brokers - They connect with Carrier partners for fulfilling the customer order, so that Business doesn't have to worry about individual Carriers integration
SCM Products:
- Some Companies whose SCM products are available in the market are:
- IBM
- Manhattan
- Salesforce
- Blue Yonder
- SAP
- HCL
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