Logistics & Supply Chain Management Software

Supply Chain Management Software Definition: What is Supply Chain Software?

Supply chain management (SCM) encompasses all the organizational tasks associated with the flow of goods, information, and money across the entire value-creation and supply chain. This involves the control and planning of the respective processes, from raw material suppliers to the delivery of finished products to customers.

Supply Chain Management Software (SCM Software) assists companies in handling these processes. In particular, it aims to increase efficiency in their processing and improve the customer experience.

Often, it includes tools for procurement, product lifecycle management, and supply chain planning (including warehouse planning and organization of business resources and production lines). It usually also integrates administrative tools for logistics (including transport and fleet management) and order organization. For internationally active companies, SCM also refers to activities of global trade. It helps, for example, with managing cross-border suppliers and multinational production processes.

Supply Chain Software vs. Logistics Program As already hinted at in the previous paragraph, supply chain management software often includes specific logistics tools. However, logistics programs and supply chain software are not the same thing. The software for supply chain has an enterprise-wide view of all business processes and connects numerous areas of the value-creation and supply chain, such as purchasing, production, controlling, etc. Logistics is part of the associated processes.

Since many of the processes that take place in the supply chain require logistical organization, the terms "Supply Chain Management Software" and "Logistics Software" are often used synonymously.

Why should companies use a supply chain software?

The principle of division of labor is old but has undergone a revolution in recent decades. Originally, various work steps in the value-creation and supply chain were internally divided among employees in order to increase profitability. Nowadays, globally active organizations share tasks - from the supply of raw materials to the delivery of products.

Despite this, individual processes span vast distances. Yet, under this principle of division of labor, companies usually produce faster, cheaper, and ultimately more customer-friendly than a company at a single location could.

Gleaning the maximum success from this works, of course, only with the optimal management of the respective processes. In general, these structures require close cooperation and intense information exchange. The more links in the chains and the greater the distances, the more effort goes into organization. Without a suitable SCM program, little can be achieved here.

However, this by no means implies that only international corporations can benefit from supply chain management software. Even the smallest firms can operate much more efficiently with a SCM solution tailored to their needs and also harness the second major target aspect of SCM: increased customer satisfaction.

Thanks to SCM software, both large and small companies are able to quickly and accurately meet the expectations of their customers by ideally coordinating the raw materials, manufacturing, logistics, and trade and order management. Certain articles can thus always be reliably delivered to customers within a reasonable time frame.

How does SCM Software work?

How supply chain software solutions work depends, of course, largely on what features they come with. Explaining all possible functionalities at this point is not possible due to the often massive scope of SCM system software. However, the following tools and associated procedures are typical.

Monitoring and Planning SCM systems provide varied information, such as about the shipping date, time, ID or order number, freight data, and much more. Companies can analyze these facts to track KPIs and make better strategic decisions. A central dashboard helps those in charge to monitor procurement, manufacturing, and logistics from one place and anticipate possible disruptions before they occur.

Later in the process, performance data can be fed back into the SCM software to improve forecasts and trends. Planning also aids inventory management by, among other things, automatically assigning stocks for high-priority orders.

Order Processing and Inventory Management One of the main SCM requirements is to quickly and accurately get an order from sales to delivery. Order processing functions streamline related order activities, increase the number of perfect deliveries, and ultimately improve customer satisfaction. The main focus of the corresponding tools is on creating and handling orders, including orders from various channels and possible direct deliveries. Invoices can also be organized here.

Inventory management assists in assessing the way in which companies introduce materials into their processes and how these are subsequently moved. By using software to organize these activities, those responsible get a better insight into the collaboration with their suppliers. This also provides the opportunity to accurately manage stocks at all possible stages of the process chain.

Warehouse Management A warehouse management system allows for more accurate control of warehouse operations. Corresponding SCM features help users to better control warehouse operations.

This logistics software involves all central processes, including the organization of personnel resources, materials, warehouse space, and operating protocols.

Logistics and Transport Software Logistics management software controls the systems and places responsible for the internal movement and external transport of goods. In many cases, this involves a mix of tools for fleet management on the road and monitoring solutions for other types of transport, such as rail, air, or sea transport.

By extensively monitoring shipments, those responsible can identify problems at an early stage and thus have the most time to get back on track. Moreover, using such logistics planning software in general allows for a very efficient handling of shipments.

Procurement and Supplier Management Tools for procurement and supplier management also fall into the area of transport logistics software but specifically relate to suppliers. They provide a slightly different perspective on the task of evaluating supply chain processes.

Many of these tools deal with costs, contract management, supplier quality, and other important aspects. They aid in controlling the procurement of raw, auxiliary, and operating materials and evaluating the aspects of the relationships between companies and their suppliers. Again, this is often a powerful logistics optimization software.

Supply Chain Analysis In addition to the SCM features that support the functions of a supply chain, chain management software can also evaluate the corresponding processes. These tools use business intelligence and analytics to understand how problems arise, what those responsible can do to cope with risks, and what events are likely to occur in the future.

Specific analysis tools enable companies to capitalize on existing data. This way, managers can leave behind ineffective strategies and introduce new innovations supported by numbers and facts.

Collaboration Features Collaboration features integrated into supply chain management software support business partnerships and ultimately improve the quality of the supply chain. Partners can quickly view data on the status of production processes and shipments, use transparent inventory models, or manage system access.

The functions of these resources are designed to allow multiple participants to work together on a project. Labor-intensive email and telephone communication is largely unnecessary. Manual updates are also not needed as the system can organize the corresponding data.

What are the pros and cons of Supply Chain Management Software Solutions?

Several advantages advocating for the use of supply chain management software have already been named: The main ones are the increase in efficiency of the value-creation and supply chain and the improvement of customer satisfaction. In this context, however, many more, or more specific benefits occur. These advantages are summarized below.

• Better transparency: Knowing what's happening in the value-creation and supply chain and where it's happening is crucial for effective management of the respective processes. A supply management system provides continuous transparency by offering those in charge a central overview of personnel resources, operations, and systems in all relevant areas. This optimized insight ultimately improves the exchange of data and cooperation between suppliers, distributors, and retailers and enables companies to accurately manage performance at every stage of the value-creation and supply chain.

• Increased resistance to errors: Inefficient value-creation and supply chains cost companies a lot of money. By detecting and eliminating bottlenecks that lead to delays in the relevant processes, those responsible can increase the execution speed. Moreover, the integration of SCM software into existing systems and the automation of manual tasks boost productivity and reduce time to market.

• Broad analytics: Every process within the value-creation and supply chain generates a large amount of valuable data. These include raw material costs, delivery deadlines, and sales figures, among other things. Software for supply chain management provides real-time access to this information and allows those in charge to monitor process performance. Based on this, they can make sound, data-based decisions to improve processes and offer customers the best possible experience.

• Lower costs: Cost reductions can significantly impact the bottom line and overall business success. With a supply chain management tool, managers can minimize costs. Thus, overhead costs, such as those associated with warehousing, can be reduced and waste minimized through improved control. Additionally, the ability to track payments means that suppliers are always paid on time. This way, companies avoid default surcharges and sometimes even receive discounts.

• Minimize risks: There are a number of economic, environmental, and technological factors that can pose a risk to the continuity of value-creation and supply chains. Identifying and monitoring these risks via SCM software allows potential supply problems to be detected before they occur and a plan to minimize interruptions to be created.

• Greater flexibility: Thanks to the full transparency of the value-creation and supply chain and access to all associated data in one place, those responsible can react faster to new requirements. These are to be promptly classified and implemented into the relevant processes. This way, customers can continue to be served seamlessly, and profits remain high.

• Increased compliance: Various activities within the value-creation and supply chain are associated with stringent compliance procedures. Raw materials must meet certain specifications, sustainability standards must be complied with, and customs documents are required for international shipments. The increased transparency that SCM software provides, and the ability to incorporate compliance measures into processes, reduce the likelihood of human errors. This ensures that all regulations are taken into account, reducing the risk of fines and damage to brand reputation.

These are undoubtedly a lot of strong advantages. The counter-question is now: Are there any disadvantages? Real disadvantages to supply chain management software are rare. However, it must, of course, be correctly aligned to one's own company and used correctly. When using it, there can undoubtedly be certain difficulties.

• Expensive to implement: The biggest constraint with supply chain management software or its introduction is that implementation is quite expensive. The purchase, coordination, and establishment of an SCM solution usually requires large investments in terms of time, money, and other resources. For small businesses, this can quickly become unaffordable.

• Complicated introduction: The process of supply chain management is very complex, even with specific software. It involves numerous departments within the company and often requires changing many familiar workflows. This can lead to confusion and affect the normal functioning of operations. Employees may hesitate, not fully accept the SCM program, and in some cases be demotivated. All of this would have an extremely negative impact on productivity.

How to choose the right SCM provider?

The above SCM software comparison is full of very good solutions that can meet the needs of many companies. Nonetheless, not every system is equally suitable for every operating context.

To find the perfect supply chain management software provider, it is essential to accurately assess your own needs and then compare them to the various options. The main things to consider here are summarized below.

What features are needed? When selecting an SCM software provider, those in charge should consider right from the start which features are most important for their company. Solutions can be quite comprehensive, which ultimately implies considerable costs. The more precisely one can sort out which components are really necessary and which might not be, the more money can be saved.

In some cases, industry-specific functions are also needed. If these are not available, the supply chain software can hardly exploit its potential. On the other hand, too many features that might not even be needed are also unfavorable. They make the supply tool unnecessarily complicated.

What integrations with existing systems are necessary? Another essential aspect concerns integration with the existing system landscape. Often, it is not necessary to replace all technologies just to benefit from good supply chain management.

So, one should ensure in advance that the solutions being considered can be easily combined with existing tools. Here, you may be able to save some budget again.

What is the reputation of the company behind the supply chain management solution? Of course, choosing a supply chain management software is primarily about what the solution can do. However, those in charge should also carefully check the company behind the program.

The best software in the world is only as good as the developer company that produces and supports it. Especially in HR such business-critical processes as those found in supply chain management, those in charge should pay even more attention to reliability, quality, and the long-term guarantee of all functions.

What about scalability and upgradeability? The main goals of integrating supply chain software are to streamline the relevant processes and create a higher level of customer satisfaction. Ideally, this will be accompanied by better growth, which the solution should also be able to service. So, those in charge should make sure that they choose software that is accordingly scalable and can grow with the operation.

Additionally, technology is advancing rapidly, so software that is considered innovative and modern today may be outdated in a few years. So, it is also important to ensure that the chosen solution can continue to be updated and upgraded.

What do SCM tools cost?

Supply chain management software can cost between roughly 50 and more than 1,000 euros per month. Some providers offer comprehensive suites for one-time payments of 50,000 or even 100,000 euros. These high costs mainly result from the fact that supply chain programs are usually very complex applications that often require individual development. Prices mainly depend on the size of the respective company and the functional scope.

There are hardly any free systems. However, many development companies occasionally offer free trial versions or provide demos of their solutions.