Essay about The Transformation from Traditional Management Systems to Supply Chain Management and Customer Relationship Management Systems

Words: 2405
Pages: 10

Executive Summary
Traditional management systems rely on volume to allocate overhead. Indirect cost is allocated to items such as direct labor hours, units produced or the production of machine hours. Using only single cost drivers, potentially distorts cost estimates especially when dealing with high volume production. The implementation of Activity Based Costing serves as a solution to this downside in traditional systems. ABC utilizes various cost drivers both volume and non-volume related to estimate costs, providing more accurate estimations. Although this method benefits managers in providing the information needed for decision making and improving efficiency of business processes, it still is only limited to the internal aspect of
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The implementation of supply chain management is one such way that allows companies to maintain a competitive edge in a competitive global market. Lambert’s 2008 study found that the reason for increased interest in Supply Chain Management is the reliance of organizations on having effective supply chains to successfully compete in the global market economy. (Naslund and Williamson 2010, p. 11 ). Supply chain management is defined as “the management of a network of relationships within a firm and interdependent organizations and business units consisting of material suppliers, purchasing, production facilities, logistics, marketing, and related systems to facilitate the forward and reverse flow of materials, services, finances and information from the original producer to the final customer with the benefits of adding value, maximizing profitability through efficiencies, and achieving customer satisfaction.” (Naslund and Williamson 2010, p. 13). In contrast to traditional management systems, supply chain management is essentially a strategic approach to developing and maintaining competitive advantage and one that creates value across functional and organizational boundaries. In addition to maintaining a competitive edge organizations are drawn to the concept of SCM systems because there are other benefits involved. Melnyk, Lummus, Vokurka, Burns, and Sandor (2009) state that supply