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What is a Supply Management System?

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  • Written By: Carol Francois
  • Edited By: Heather Bailey
  • Last Modified Date: 12 September 2016
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A supply management system is a shared computer tool used to track all material orders and their respective locations. Also known as a supply chain management system (SCMS), this system is really a network of businesses that share information regarding their aspect of the product manufacturing cycle. The most common place to find a supply management system is in the manufacturing sector.

A commonly cited example of a supply management system is the auto manufacturing industry. It is common practice for a large firm to subcontract out specific parts, or modules, of the vehicle to independent companies. Each company is provided with the technology required to participate in the supply management system. This system is updated with inventory levels, work in progress, finished goods, and goods in transit. This information is only available to other businesses who are impacted by the module created by the other firms.

Access to this information in real time is essential in planning production levels, staffing, and arranging for just-in-time delivery. The overall coordination is the responsibility of the auto manufacturing firm. These firms typically have a department of staff dedicated to supply management. If a part is unavailable for installation, the entire production line must stop. This is very expensive, both in terms of staff time and in hard dollar costs.

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The actual implementation and maintenance of the supply management system is a joint responsibility, shared between the business partners and the primary firm. Supply contracts are often negotiated with incentives for performance, minimized down time, and maintenance of ideal stock levels. It is in the best interest of both parties to ensure the system is up to date and accurate.

There are several methods used to update this type of system. The most common method is a file upload. The supplier produces a flat file from the inventory management system and provides the relevant information to the customer on a daily basis. The customer must have a method in place to pick up the file and update the supply management system. This process is usually automated, to avoid unnecessary delays and reduce the possibilities of error.

Other industries use an integrated, Internet-based software. The software is installed in each supplier's organization and can typically be integrated with existing inventory management systems. Programs are written or used to automatically populate the customer's software with the relevant information. Access is based on each firm's role in the manufacturing process. This method allows all suppliers and the customer to check one system for the current status of a variety of parts.

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