Asia Lagging Behind in Supply Chain Management

SINGAPORE (05/23/2000) - Although supply chain management (SCM) is critical to the survival of manufacturing and distribution organizations, only 51 percent of the organizations in South Asia have gone to information technology for help to improve that vital process, according to research organization, Input Inc.

In its study, The Executive Guide to Supply Chain Management in South Asia, Input noted that SCM is a critical success factor in the manufacturing and distribution industries.

"It is essential for any company that has a supply chain," said Reid Rasmussen, managing director, Asia-Pacific, Input. "But not only are half the organizations here not doing anything about it, and we're talking about large and medium-sized companies, one quarter are not even planning on doing anything."

Rasmussen also feels that the region is still two to three years behind the United States in terms of SCM implementation.

"And in an economy that is moving so quickly, that is an eternity," he said.

While enterprise resource planning (ERP) systems help companies manage their internal resources, SCM focuses on the management of processes outside the company, and how to more effectively manage its suppliers.

According to Input, organizations that have implemented SCM reported benefits such as reduced costs, higher margins, faster time to market, reduction in inventory, and improved cash flow.

"SCM is also about maximising efficiency, supplier relationships, and quality," Rasmussen added.

Analysts generally categorise SCM software into two types: "supply-chain execution," including order management, transportation scheduling, and warehouse packing and shipping; and "supply-chain planning" for forecasting demand, inventory replenishment, and manufacturing/production scheduling.

Players in the first category include EXE Technologies and International Business Systems, while supply-chain planning includes i2 Technologies, Manugistics, and iLog. In addition, ERP vendors such as Oracle, SAP, and Baan, are also fielding SCM-style products. Also, users still roll out their own customised SCM programs.

But SCM will not happen in isolation.

"The clear trend is that customer relationship management (the front-end) and SCM (the back-end) are integrated with the ERP to ensure that the whole enterprise is as efficient and effective as possible," said Rasmussen.

Also, the advent of Web-based e-commerce is leading to the transformation of SCM.

"The trend is moving away from EDI to a greater reliance on the Internet for communication within the supply chain," said Rasmussen. "E-marketplaces and business-to-business sites are still in their infancy, but are quickly emerging as a key element in the SCM equation."

In the United States, retailers, distributors, and manufacturers now want to share logistics information by giving trading partners and even consumers direct Web access to their SCM systems. In addition, some industries, such as grocery and apparel retailing, are starting to use shared Web-based online supply chains as hosted business-to-business exchanges.

Online SCM services also are attracting attention from corporations because their older electronic data interchange-based SCM systems cannot give them the real-time activity views they want.

For users, it is not easy choosing the right SCM software or service as e-commerce alters expectations, acknowledged IBM. The company does not sell its own supply-chain software but is often tapped for its systems integration expertise on SCM projects.

It is important to know that SCM vendors tend to cater to specific industries, said Richard Ruiz, marketing manager, IBM.

Input based its research on a survey of 210 organizations in six countries:

India, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

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