By JASON FERNANDO
Reviewed by MARGARET JAMES
Fact checked by SUZANNE KVILHAUG
on August 30, 2021
What Is Supply Chain Management (SCM)?
Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
KEY TAKEAWAYS
Supply chain management (SCM) is the centralized management of the flow of goods and services and includes all processes that transform raw materials into final products.
By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster.
Good supply chain management keeps companies out of the headlines and away from expensive recalls and lawsuits.
How Supply Chain Management (SCM) Works
Supply chain management (SCM) represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production to product development to the information systems needed to direct these undertakings.
Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors.
SCM is 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. Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operations.
Five Parts of SCM
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which consists of five parts:
The plan or strategy
The source (of raw materials or services)
Manufacturing (focused on productivity and efficiency)
Delivery and logistics
The return system (for defective or unwanted products)
The supply chain manager tries to minimize shortages and keep costs down. The job is not only about logistics and purchasing inventory. According to Salary.com, supply chain managers “oversee and manage overall supply chain and logistic operations to maximize efficiency and minimize cost of organization’s supply chain.”1
Productivity and efficiency improvements can go straight to the bottom line of a company. Good supply chain management keeps companies out of the headlines and away from expensive recalls and lawsuits.
Reference: Investopedia