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What is supply chain management?

Supply chain management (SCM) refers to the management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. The activities of the supply chain include product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.

SCM attempts to have a control or link the production, shipment and distribution of a determined product. The concept of supply chain management is based on two core ideas, according to a recent definition by the NC State University.

The first is that almost every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain.

The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their “four walls.” According to NC State University, few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains.

The main goal of a supply chain management is to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible.

Through supply chain management, companies operating in different industries are able to reduce certain costs and deliver products to the consumer in a faster process. This result is achieved through internal control of inventories, production, distribution, sales as well as the inventories of company vendors. The concept of supply chain management is mainly based on the idea that nearly every product that comes to market results from the efforts of various organizations that make up a supply chain.

The starting point of a supply chain is the delivery of raw material from a supplier to a manufacturer, and ends with the delivery of the finished product or service to the end consumer. Supply chain management is in charge of overseeing this whole process, paying close attention to each phase of a company’s product or service. An efficient supply chain management allows companies to increase revenues through efficiencies and reduce internal costs, among other benefits.

The Supply Change Council has defined five key phases which define the supply change management process. The SCOR model runs through five supply chain stages: Plan, Source, Make, Deliver and Return.

The first stage in supply chain management is known as plan. A company must develop a plan or strategy in order to address how a given good or service will meet the needs of the customers. A significant portion of the strategy should focus on planning a profitable supply chain. A key element of SCM planning is developing a set of metrics that will allow companies to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.

Source is the next stage in supply chain management. This stage involves building a strong relationship with suppliers of the raw materials needed in making the product the company delivers. This phase involves not only identifying reliable suppliers but also planning methods for shipping, delivery, and payment.

At the third stage, make, the product is manufactured, tested, packaged, and scheduled for delivery. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery.

The fourth stage is deliver. At this phase of the supply chain, customer orders are received and the delivery of the goods is planned.

The final stage of supply chain management is called return. During this stage, customers may return defective products. The company will also address customer questions in this stage.

 

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