Reference Guide to Supply Chain Management (SCM) Features and Functions

Anne Le Bris and Melissa Vaes, with contributions from TEC analyst data - 5/4/2010 1:24:00 PM

This SCM reference guide provides insight into the supply chain management (SCM) features and functions currently accessible on todays market. This guide will help you understand which features are essential for your organization and which are not. You can also download a comprehensive guide in Excel format, with all of the nearly 2,600 SCM functions and features, at TECs Supply Chain Management (SCM) RFP Template page. Before we get started, here is a short definition of the role of SCM software in supply chain activities:

What Is SCM Software?

SCM software manages product flows from supplier, to manufacturer, to customer. In brief, it manages supply and demand for an organization. According to APICS, SCM software refers to the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally. SCM systems integrate all features of procurement processes, warehouse management system (WMS) features and functions, transportation, and logistics, as well as other product planning modules. To learn more about the distinction between advance planning and scheduling (APS), SCM, and enterprise resource planning (ERP), read TECs article Comparative Analysis: Are You Still Confused About APS, SCM, and ERP?

About This SCM Guide

Our SCM request for information (SCM RFI) template is composed of almost 2,600 criteria; consequently, well focus here on the big picture features only. Weve brought SCM features together by broad category: 1. Warehouse management system (WMS) 2. Transportation management system (TMS)

3. 4. 5. 6. 7. 8. 9.

International trade logistics (ITL) Supplier relationship management (SRM) Demand management Supply chain analytics Order management Service parts planning Product technology

These categories correspond to a high-level functional breakdown of software features. In this reference guide, we give a short explanation of how each category impacts your supply chain management processes. If you would like more information about full listings of enterprise software functions and features (SCM, ERP, and other enterprise software categories), please see TECs RFP Templates.

Supply Chain Management (SCM) Software Functions and Features

SCM functions and features, submodule #1: warehouse management system (WMS) Functionality This category includes the general warehouse management functionalities such as warehouse configuration, bin location and product setup, inventory control, license plate tracking, quality control, picking, packing and shipping, etc. Adaptability The adaptability module in SCM software covers business processes, decision support, and reporting. Warehouse management system (WMS) technology configuration The technology configuration addresses WMS-specific functionality such as radio-frequency identification (RFID), security, and internationalization supported by each vendor. It also touches on programming and other technologies used in the development of the WMS application.

SCM functions and features, submodule #2: transportation management system (TMS) System definition and implementation The TMS should include tools and applications to enable to create profiles for all your contracts, associated carriers, and trade lanes for inter-modal and multi-leg moves. This should support regional as well as international transportation movements. The key to the successful operation of the TMS is a robust foundation created during the system implementation. Transportation management operation functionality Transportation management operation functionality allows distributors to align their transportation operations with their supply chain strategies and overall business objectives. This includes areas that take into

consideration the entire shipment life cycle, from planning, network optimization, and execution, to shipment tracking and analysis.

SCM functions and features, submodule #3: international trade logistics (ITL) Collaboration True collaboration across a global and disparate set of entities and information systems requires a neutral and secure environment. This type of environment enables all players to engage in an electronic dialogue to collaborate in acquiring, transferring, transporting, and settling with regional and international trading partners. In addition, the data model should take into account the different roles of all participants and manage these through a set of rule-based processes. As such, the system implementation should include clear definitions in terms of buy-sell relationships, financial terms, and service level agreements, as well as related contact details and user profiles for suppliers, customers, and related service providers. Content The system should support all the data and information required in order to establish a true total cost of goods sold at the time of the initial buy-sell transaction. The SCM software should also enable users to track incremental costs as the shipment is processed from point of origin to final point of receipt. All costs and activities should be available at the transaction initiation point and can be classified by the primary components, which are product costs, compliance costs, and logistics costs. Commerce Starting with the initial request for goodswhether this is an RFI, a request for quotation (RFQ), or a formal purchase order, all information that is exchanged during the shipment life cycle should be facilitated by the international trade logistics (ITL) system. This requires a synchronized system and process, where the product and shipment requirements are integrated into an automated order fulfillment environment. The product item master and associated tables will determine the cost of the product as well as the relationship between the product and any duties or tariffs that are applicable. Tables related to customs duties and tariffs as well as associated rates of exchange and transportation costs should be available as part of the system functions. This will enable the user to obtain an estimated total cost of goods sold as well as a final cost of goods sold, to highlight any variances or discrepancies. This implies a data model that includes an understanding of all the data exchanged and processed at the product and item level, between order management systems, as well as the data exchanged with warehouse management and transportation systems.

SCM functions and features, submodule #4: supplier relationship management (SRM) Design Best practice dictates that strategic suppliers be involved in the new product process from the very beginning i.e., the concept, requirements, and design definition phase. Supplier relationship management (SRM) suites support this with functionality for requirements collaboration tools, component selection tools, and bills of materials (BOMs) grading. Sourcing Many consider sourcing to be the heart of SRM and commodity management to be the heart of sourcing. Advanced sourcing suites are rich in analysis and decision support technology to absorb huge amounts of data quickly and make intelligent sourcing decisions. They also lay the foundation of execution through RFI, RFQ, and RFP processes, and manage performance against contracts. Risk management is an area which spans the full life cycle, in particular association with the sourcing function.

Procurement Procurement is generally divided into material requirements planning (MRP)-driven procurement (sometimes referred to as direct materials procurement) and requisition-driven procurement (sometimes referred to as indirect or maintenance, repair, and operations [MRO] procurement), although some long-lead-time, first-run direct materials are ordered via requisitions. This division reflects substantial differences in the two methods of procurement. Management of catalogs supports requisition-driven procurement and the sourcing processes that precede MRP-driven procurement. Fulfillment The bulk of fulfillment functionality is traditionally performed by ERP and related systems such as order management, warehouse management, and distribution management systems. As companies virtualize and suppliers become increasingly involved in the fulfillment process, some functionality is appropriate within SRM. SRM systems should support a range of modern inbound inventory management practices, such as kanban and vendor-managed inventory (VMI) and provide visibility into the inbound pipeline. Returns management becomes important in SRM for situations where components are being returned to and repaired or replaced by suppliers. Manufacturing As with fulfillment, the bulk of manufacturing functionality is traditionally performed by ERP systems. However, the important supplier-facing processes of quality and engineer change order (ECO) management may be done outside the ERP system as part of an SRM suite. Settlement The primary SRM-related function for settlements is in reconciliation between the original order, actual received goods, and the invoice. Advanced settlement processes may also be supported, such as evaluated receipts or electronic invoice presentation and payment. Utilities There are several areas that span across the lifecycle categories. Specifically, you need project management utilities during design, sourcing, and manufacturing. The same is true for managing BOMs and managing cost. Infrastructure SRM is by nature an integrative function and requires the infrastructure to support that integration, as well as to manage the massive volume of related content, alerts, and data.

SCM functions and features, submodule #5: demand management Promotion planning Promotion management systems allow your organization to plan promotions with your trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware include the following:
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Promotion plans are frequently not integrated into the demand stream. Promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.

Pricing and profit optimization The pricing and profit module manages profitable and sellable prices for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various

organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus, the ability to track and report history is equally important for managing pricing activities. Forecasting Reliable forecasts are based not only on algorithms that are appropriate to the business setting, but also on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensuring that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions. Merchandise planning Merchandise planning analyzes demand at the item level. It allows organizations like merchants (retailers) to understand demand based on issues ranging from demographics, store locations, shelves, and support, to purchasing as well as the positioning of merchandise in the retail channel. Life cycle planning Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up, or supplied with excess in later stages. In addition, firms are frequently left with excess inventory thanks to ECOs or other product changes, as well as at end-of-life, due to poor planning and visibility into demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information. Consensus planning Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-thedock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecastone numberupon which the supply chain will act. Collaborative planning Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the Voluntary Interindustry Commerce Solutions (VICS) Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points). Sales and operation planning (S&OP) S&OP is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.

Vendor-managed inventory (VMI) replenishment VMI replenishment allows the co-management of inventory by both customers and suppliers. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, VMI dynamically detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order. Event planning Event planning for various marketing events has become more complex as more firms use a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need finely tuned planning to be successful. Today, systems must move from PowerPoint-level tools to strong profit analytics for ensuring market success and return on investment (ROI). Metrics and reporting Metrics and reporting capabilities today must be forward-looking to report (but more importantly, prevent) negative business performance. Beyond excellent modeling and simulation capabilities, metrics systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders, naturally. Demand management systems architecture Demand management tools have unique and high levels of integration requirements. These requirements should be factored into your evaluation of SCM functions and features if your organization places a high priority on demand management functionality.

SCM functions and features, submodule #6: supply chain analytics Supply chain optimization Supply chain optimization modules allow you to design the best-fit (optimal) supply chain by time, cost, and other factors, in order to create responsive and lean supply chains. Each module has a unique specialty such as logistics or inventory. In addition, the optimized network blends and trades off all these factors. Supply chain event management Supply chain event management (SCEM) or supply chain network systems are a new class of solutions designed to monitor, notify, analyze, measure, and control business process and execution types of activities. These systems take advantage of new architectural principles brought about by several forces: high-availability, publish-and-subscribe architectures; tools like Java; the maturity of artificial intelligence (AI) rule-based programming capabilities; emerging agent technologies; and Web architectures and standards such as simple object access protocol (SOAP) and extensible markup language (XML). These solutions allow open, real-time views into global information, as well as the ability to pinpoint and drill into key information, sensing deviations in business plans versus execution expectations (unplanned events). Production and supply planning Today's supply chain planning systems have significant advantages over the manufacturing resource planning (MRP II) systems of the past. These systems incorporate up-to-date algorithms and philosophies on how supply chains work. In addition, they have a technology advantage over MRP II, in that they are memory-resident, which allows the solutions to solve simulation issues extremely quickly, with very large arrays (models). These large models solve simultaneous, multi-level, and multi-node problems that MRP II systems cannot.

SCM functions and features, submodule #7: order management Order promising The order promising submodule includes criteria for available-to-promise (ATP) and configuration management across multiple databases, integration of configuration management with multiple unique BOMs, and integration with demand and replenishment orders. Inventory management and visibility Many organizations want to provide real-time promising, so inventory visibility from multiple sources is critical. Sourcing A primary attribute of a distributed order fulfillment system is the ability to perform multi-stage sourcing and assembly. This requires a very open architecture to integrate seamlessly with various systems and supply chain nodes, in a real-time fashion. Execution visibility Once an order has been promised, keeping track while the order is built and shipped has become a critical function in the supply chain. Inbound and assembly coordination or multi-site staging Many orders are sourced and built by a network of partners. Frequently, notification of cancellations does not occur. Keeping these orders synchronized is critical toward meeting schedules as well as avoiding over-building or building ahead of demand. Shipping and outbound management Once an order has been created and built, it must be shipped. Notification of advance shipments to customers is key to seamless transportation, as well as tracing, tracking, and receiving the orders. Order management-specific technology A distributed architecture is key to a successful order management system, whether supply chain nodes are internal or external to the enterprise.

SCM functions and features, submodule #8: service parts planning Planning Service parts planning deals with the creation and replenishment of a supply network for service operations. This can include original equipment manufacturers (OEMs) and service partners, as well as service logistics providers. Service delivery and execution The service delivery and execution submodule includes functionality for integration with call center systems (for dispatching requirements), service response prioritization and optimization, allocation of scarce parts, and dispatch. Workforce optimization Workforce optimization is used for determining the right skill mix and location of personnel to support service demands. This can include on-site, co-managed personnel at the customer site.

Logistics transportation and reverse logistics Transportation planning and execution has a significant role to play in the service supply chain. As in traditional models, there is always a trade-off in time and cost between fixed assets and delivery responsiveness in serving customers. Dynamic repair needs such as emergency breakdowns in remote settings can exacerbate delivery problems. In addition, reverse logistics issues, such as pickup of parts for delivery to third-party locations for repair, are addressed in this submodule. Analytics and reporting The service planning system is a wealth of information for many organizations which are accountable for product planning and design, asset and capital management, and general customer relationship management. Therefore analytics and reporting features are not just designed to enable functional excellence, but also to feed these other key areas of the value chain.

SCM functions and features, submodule #9: product technology Architecture Architecture refers to the framework for organizing the planning and implementation of data resources. It also refers to the way the system is designed and the manner in which all components are connected to one another. User interface User interface refers to the manner in which people access and interact with the software. The user interface should facilitate the user's easy operation of the software. Platforms The platform refers to the framework, both the hardware (e.g., type of processor) and the operating system that allows a computer or set of computers to function. Application tools Application tools are the components that provide the ability for an application or program to work. Reporting Functionality for reporting refers to technical options for generating and delivering reports. SaaS and hosting options This category refers to features for software-as-a-service (SaaS) or hosted solutions

Final Thoughts
A comprehensive SCM RFP will also include other general considerations, including reseller and value-added reseller (VAR) channels, along with vendor viability considerations. We hope youve found this reference guide helpful. For more information about SCM features and functions, as well as functionality for other classes of enterprise software, please visit TECs RFP Templates page. For more information and to start your own custom solution evaluation of SCM software, including the ability to assess and prioritize the SCM functions and features that are important to your organization, please visit TECs SCM Software Evaluation Center.