What is Supply Chain Management Software?

Supply chain management software is a class of software that allows suppliers and clients to share information through one continuous computer program. This type of software is found in the manufacturing sector but also can be used in the distribution industry. The primary purpose of this type of software is to track materials in a shared production or assembly process.

The first part of the supply chain begins with the movement of raw materials. When materials are received, the supplier updates the system with the details of the materials. As the materials are used and products are created, they are tracked in the supply chain management software. The system is updated at fixed points in the process, including at the end of the process.

There are two types of supply chain management software products: enterprise and dedicated. An enterprise system has connections to modules and data concerning financial, human resources, supply and material aspects of the process. A dedicated system has no connections to other systems and functions completely independently. In order to share information with other software tools, custom programs are required to extract the data for analysis or to update other systems.

In many manufacturing companies, supply chain vendors are an integral part of the process. Using a supply chain management software product, each individual supplier can access data about the current status of the production process. The data provided to the supplier includes inventory levels, number of units in production and units in quality control.

Through this type of software, each member of the supply chain retains control and responsibility for inventory levels. Most companies that utilize supply chain management software build productivity and performance into the contract with the supplier. The supplier is charged for any interruptions in production that are caused by issues with stock or inventory. Payment often is tied to finished products that pass quality inspection, which encourages both high quality and timely delivery.

The effective use of supply chain software has resulted in a reduction in production interruptions and delays because of inventory problems. By providing access directly to the system, data is exchanged immediately, reducing delays and communication problems. The suppliers are integrated into the process and are highly motivated to ensure that stock is maintained at the proper levels, which benefits everyone. This information also is used during contract negotiations, which can be a benefit for either the client or the supplier, depending on performance.