Advisory Oct, 08 2009

SCM a significant source of success

Have you ever thought while buying commodities and merchandise about how the store or the company manages to make available all the material for us as and when required. Well, Supply Chain management SCM is your answer. But what is it all about. Read ahea

By Neha Malhotra
Sub Editor, Franchise India Holdings Limited, Web Division
SCM a significant source of success

Having the right item in the right quantity at the right time at the right place for the right price is the strategy behind successful franchise business. There are various aspects in a franchise business that need to be supervised very efficiently, SCM being one of them.

Process of SCM

Managing the supply of products for one or two franchisees might be easy for the franchisor but the supervision gets complicated with the existence of numerous franchisees and even more with the existence of numerous categories of a single product. Traditionally, marketing, distribution, planning, manufacturing and the purchasing organisations along the supply chain operate independently. A process called SCM simplifies the entire system. SCM is the process of planning, implementing and organising the operations of the supply chain as proficiently as possible. SCM envelops all advancement and storage of raw materials, inventory, and completed supplies from the point-of-origin to the point-of-consumption. Supply chains exist in all the organisations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

Role of SCM in franchising

Supply Chain Management is the most complex in franchising as it involves a range of franchise outlets. But once an appropriate technique of managing is formed, it helps the franchise business flourish in a big way. In franchising various companies have formulated a definite procedure and have formalised the process of SCM for successful functioning. The role of SCM has increased over the years mainly due to the growing intricacies of supplying one's business ideologies to the franchisees with materials, and shipping out products in a more globalised supply chain. Though it is multifaceted if upheld precisely it has can fetch enormous profits for the companies. It is because of SCM that it is now easier to keep record of the production, stocks and sales.

Technology helping franchisors

During the past decades, globalisation, outsourcing and information technology have enabled many organisations to manage the supply chains in a better and organised way. There are two main types of SCM softwares: planning applications and execution applications. Planning applications utilise advanced algorithms to establish the finest technique to fill an order. Execution applications track the physical status of supplies, the administration of materials and financial information involving all franchisees and vendors. But the most effective technologies for the franchise business are based on an open data models that support the sharing of data both inside and outside the enterprise.

Inventory management

Inventory is a list for supplies and materials, which are held available in stock by a business. Managing inventory in the supply chain is vital to ensure high customer service levels. Nevertheless, it is also an extremely expensive asset to maintain. The use of strategies like eliminating dead stock, ABC analysis, systems contracting and stockless buying, vendor-managed inventory and Efficient Consumer Response (ECR) strategies has reduced inventory expenditure for many franchisors. Cross docking is a practice used to decrease inventory storage by reorganising the flow between the manufacturer and the franchisor.

Efficient logistics

As SCM involves not just one or two people or companies, but the coordination between the various players in the chain is the key in its effective management. Logistics form an important part of the process of SCM. Some companies have in-house logistics arrangements while many have either partially or fully outsourced their logistics operations. Without efficient logistics the entire process of SCM would be a failure.

Sum up

SCM is the science of processes and integrates all the sectors of the country. While a number of new practices have been adopted internationally for SCM, Indian players still lag behind. If the country puts to use all the available sources it can definitely give strong competition to its international counterparts.

Key elements for flourishing SCM

  • Enrichment of inventory management
  • Enhancement of merchandise planning methodologies
  • Suitable vendor selection by franchisors
  • System integration between franchisors and franchisees
  • Technology up gradation from time to time
  • Logistics network modification
  • Cross docking used efficaciously

Related: Multiple ways to multiply profits

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