Supply Chain Management Overview

What is Supply Chain Management?

Supply Chain Management (SCM) is the management of upstream and downstream relationships with suppliers and customers in order to deliver superior customer value at less cost to the supply chain as a whole (Christopher, 3). The scope of supply chain management includes many different elements, ranging from the optimization of ordering processes to effective distribution of products to various outlets. SCM also includes harvesting raw materials, moving them to a supplier, manufacturing goods, and monitoring work-in-process goods.

SCM is an important component of logistics, which controls the flow of products and information through a business. SCM creates links between the logistics of the firm and the other external processes or entities essential to operations and production. Because of these links, the management of both relationships and flow of information between these entities is extremely important to supply chain management. The five major components of supply chain management are:

Plan: This is the stage that occurs before anything has been produced. At this point, the firm needs to analyze strategically their goals and needs in order to construct a system that reflects these. Furthermore, it is important for the firm to institute metrics that will allow them to monitor the efficiency and effectiveness of the system they implement.
Source: : At this phase, companies must carefully choose their raw materials suppliers. This requires supply chain managers to create pricing schemes as well as cost projections in order to determine which suppliers to use. This then sets up the SCM system to monitor inventory, work-in-progress goods, as well as payment and order processes.
Make: This is the stage where goods are actually manufactured. During this time, goods are produced, quality tested, packaged, and readied for delivery. This stage is sometimes the longest, as it requires meticulous assembly of the good, as well as multiple tests against many rubrics to determine quality effectively.
Deliver/Logistics: At this stage, companies coordinate customer orders, warehouse networks, distribution channels, and an invoice system in order to make the exchange of goods and money as smooth as possible.
Return: The last phase of the supply chain demands that the system be receptive and flexible. For example, if a good is returned as defective, that good must be entered into a system that monitors not only how the good will be disposed of, but also how money will be returned to the consumer who purchased it.

While the title does use the word "supply", this process can also be thought of as demand chain management because the chain of production should be driven by the demand of the market instead of by supply. Firms need to be able to quickly adapt and respond to the current needs of the market. This Wiki will discuss various strategies and tools used to manage the supply chain to be capable of quickly reacting to changes in the market.

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Christopher, Martin. Logistics and Supply Chain Management. Pearson Education UK, 2010.