Supply Chain Service Management
What is Supply Chain Service Management?
Supply Chain Service Management—often referred to as SCSM—is simply how supply chain teams manage processes that occur outside of the transaction systems. This includes any process within the end-to-end supply chain that is not entirely contained within a single transaction system.
The core concept of SCSM is the belief that supply chain processes should be managed as a service. Any time a process extends outside of a single transaction system, SCSM is used to manage that process as a service. A typical SCSM scenar- io could involve managing a late shipment. A Transportation Management System (“TMS”) would trigger an SCSM incident, with all of the relevant information pulled from the TMS system, kicking off a workflow. In this case, the incident would alert the logistics team, which can sort and prioritize its queue of incidents based on importance. The customer service team and the carrier representative would be copied to the incident to simplify communications and actions. Over time, the data that is collected on each incident is used to identify trends and to implement preventative and corrective actions.
Why is SCSM Necessary?
Roll over the boxes to look at the life of a typical supply chain professional:
We see this same routine play out in supply chains around the world. According to a study by PwC, only 41% of companies have an optimized response to supply chain disruptions that allows them to address incidents in a dynamic, flexible, pro- active, and collaborative manner. The other 59% spend their day in reactive mode, with ad hoc approaches that result in constant firefighting of the same issues. As a result, over 60% of companies report a 3% or higher drop in key performance indicators due to supply chain disruptions.
While some industry veterans might jest that supply chain is synonymous with chaos, it’s important to recognize that this type of unstructured, ad hoc problem solving isn’t just inconvenient, but has real consequences:
1. Time: Fewer than one third of supply chain professionals view their processes as effective.
2. Culture: Supply chain management positions are notoriously strenuous and hard to fill, with an industry-wide hiring shortage of around 54%.
3. Customer Satisfaction: 84% of customers will not return to a retailer after a poor delivery experience, and 98% say that shipping impacts brand loyalty.
By delivering supply chain processes as a service, SCSM ensures reliable, repeatable, and efficient processes across the end-to-end supply chain. With SCSM, firefighting is unnecessary, supply chain teams are not burned out, and customers are happier.
What Does Good SCSM Look Like?
Good SCSM adds structure, accountability, and transparency to ensure day-to-day operations run as quickly and efficiently as possible. Good SCSM embraces a dynamic and flexible approach, allowing companies to proactively address disruptions before they impact customer satisfaction. It also enables continuous and substantial long-term progress. An optimized SCSM process would be able to identify an issue the moment it arises, assign accountability to the person responsible for handling the issue, and collaborate in order to resolve the issue. So say, for instance, that a critical part shortage occurs. SCSM allows your team to immediately see the shortage, notify the rest of the team that there’s a problem (with all the relevant information included), identify a person who works with the provider, and communicate with them on how to solve the issue.
Since SCSM is a new concept for many people, let’s start by describing what good SCSM does NOT look like:
Early-morning phone calls asking for urgent status updates
Excel files acting as the source of truth
Email chains that seem to include everybody except a clear owner
Firefighting as a behavior that’s encouraged or even rewarded
Decision-making based on anecdotes instead of data
Leadership or oversight meetings run with outdated analytics that take obscenely long to prepare
Customers complaining about the same problems over and over
For anyone involved with supply chains, this type of management surely rings all too familiar. Unfortunately, so do the repercussions:
• Ineffective processes
• Inefficient resourcing
• Recurring disruptions
• Unhappy employees and customers
The end result is a combination of long-hours and short-term fixes. Trying to band-aid the system this way is like putting scotch tape on a leaking pipe. Sure, it might hold for a little bit, but we all know there’s going to be a mess sooner or later.
Now that we’re all clear on what SCSM is not, let’s talk about what good SCSM actually looks like:
• Single source of truth for full transparency
• Cloud-based platform to properly queue and prioritize incident requests
• Clear ownership to ensure accountability
• Well-defined SLAs that eliminate firefighting
• Seamless collaboration with supply chain partners
• Meetings that leverage real-time dashboards, no prepwork required
• Active root cause analysis to permanently eliminate recurring issues
With SCSM, supply chain processes are managed as a service, and things look very different:
• All processes are organized and systematized
• Problem solving is streamlined and wasted effort is eliminated
• Issues are corrected proactively before they impact the customer
• Data is centralized, which enables long-term optimization
Did you know 60% of service levels do not live up to S&OP projections?
Download our 2019 Benchmark Report on the state of S&OE (sales and operations execution) in today’s Fortune 1000 companies.
Common Barriers to Adopting SCSM
If we know the standard processes don’t work, then what holds us all back from adopting SCSM right away? For starters, SCSM is a new concept empowered by new technology. That aside, here are the five most common reasons we hear for staying with the status quo:
1. Our team doesn’t like change
2. The IT team has zero capacity to support a new system right now
3. Things aren’t actually that bad
4. Things are too bad right now to do something new
5. SCSM sounds too good to be true
In the Beginner Guide to SCSM, we’ll address each of these concerns. We’ll also give you a blueprint for adopting SCSM in a way that best fits your specific supply chain.
What is SCSM Used For, and How Does it Work?
SCSM can be used to manage any supply chain process as a service. This includes any process in the plan, source, make, or delivery component of the end-to-end supply chain. Popular processes managed with SCSM include:
• Late or delayed shipments
• Stock transfer orders
• Supplier non-conformities
• Deductions, chargebacks, and penalties
• Service level disruptions
• Crisis management • Load notes
• OS&D / returns
• And many more
In the exhibit below, we show the most common use cases by function.
As you’ll notice, SCSM can be applied within functions (e.g. Planning, Production, Logistics, Procurement, and Customer Ser- vice) as well as across functions to support Crisis Management, War Rooms (virtual and in-person), or any process where data centralization and clear accountability are a priority.
In addition to enabling individual use cases, SCSM can also be applied to broader, multi-leveled initiatives. In these situations, SCSM aggregates multiple supply chain processes, sharing a common objective, and manages them collectively as a service. Examples of multi-process SCSM initiatives includes S&OE and CAPA for supply chain:
• SCSM for S&OE: Sales and Operation Execution (S&OE) is the on-the-ground methodology supply chain teams follow when responding to any incident that impacts service levels—from late shipments, to production issues such as part shortages, to quality issues. S&OE focuses on dealing with granular supply chain incidents that play out over a matter of days or weeks. That being said, one of the core principles of S&OE is rapidly responding to any disruption in order to maintain service levels. When teams work without an SCSM process in place, they often fight an uphill battle of working with old information, slow response times, and costly last-minute expedites. Implementing a SCSM platform can allow teams to efficiently handle any incident through an established workflow. Elementum user GCC exemplifies S&OE in action. They used a straightforward four-step playbook for identifying incidents, assigning accountability, collaborating on their root cause, and resolving them. GCC also established weekly and monthly meetings that supported collaboration and created a positive feedback loop for reinforcing this structure. This process led GCC to drastically reduce the amount of time it spent resolving incidents, from 30 days or more to just under five.
• SCSM for CAPA: Corrective and Preventative Actions (CAPA) is a well-established decision-making framework that takes a data-driven approach to problem solving. Companies can deploy CAPA within SCSM in order to address and resolve recurring supply chain issues, by setting up an established protocol for identifying incidents and working through them. Elementum user Blue Diamond, for instance, chose to implement CAPA and use Elementum’s SCSM platform to support the process. Over the course of a one-month training program, Blue Diamond employees created an incident categorization system that identified and categorized eight incident types and 30 subtypes. From that point, employees began identifying and reporting incidents, while the platform’s analytics drove actionable insights that allowed leadership to address root causes and bring about corrective actions. With a clear workflow and permanent incident resolution at hand, Blue Diamond decreased their average resolution time by 60% and protected at least $250K of revenue in their first CAPA alone.
What Is Supply Chain Service Management?
What is supply chain service management, why is it necessary, and how does it work? Includes examples from client success stories, data from the latest research, and a thorough explanation of the power of adopting a supply chain service management platform.