Essentially, supply chain management (SCM) consists of a subset of business processes, and that makes it an especially good candidate for BPM. In fact, processes and process-improvement capabilities are typically embedded in SCM systems.
The problem: All too often, enterprises don't use those functions effectively. Those falling short of their SCM goals—especially in terms of inventory optimization—can often benefit significantly from evaluating and optimizing their business processes.
Starting with SCM basics
SCM involves coordinating and integrating the key processes that make up the supply chain. "A process is a way that a company gets work done. Processes define what an organization does," explains Joel Wisner, professor of supply chain management at the University of Nevada, Las Vegas. "These key processes would define what a supply chain is for an organization, too."
Because BPM involves automating and standardizing processes or parts of processes, it can provide plenty of benefits when applied to SCM.
"One of the characteristics of supply chain is that end-to-end processes cross multiple barriers within and across organizations," says Robert Kugel, a senior vice president with Ventana Research, a benchmark research and advisory-services company. "Because of that, a lot of handoffs have to take place." Automating those handoffs and ensuring consistency and timely execution not only speeds up processes, but helps minimize errors, saving time and money.
BPM can help achieve the ultimate goal for most SCM platforms: reducing or optimizing inventory. "Anytime you speed up processes and reduce errors, it will support optimizing inventory," Kugel points out. "If your execution of purchases and deliveries is more accurate, you'll have less stuff lying around and less stuff to physically move around than if you have errors in what you're ordering and what you're delivering."
SCM and BPM
Most SCM platforms come with some form of built-in BPM. The real questions, according to Kugel, are: Is that functionality sufficient, and are you using it to its fullest? "Often, companies may cut corners when implementing supply-chain and ERP [enterprise resource planning] software because the implementations are so expensive," Kugel says. But in many cases, that penny-pinching ultimately means that companies won't reap the returns that they'd hoped to see.