What is Supply Chain Management?

Supply Chain Management (SCM) can be defined as a management of a chain or a network of interconnected businesses. The goal is to fulfil customer’s needs and in the same efficiently manage the supply chain. Companies involved in the supply chain have different roles like supplying raw materials, manufacturing the goods, warehousing the goods, handling the logistics, etc. Supply Chain Management is therefore very complex area to handle if we compare for example to the management of an individual company’s activities.

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In SCM there are three main flows: the product flow, the information flow and the financial flow. In product flow, raw materials move from supplier to manufacturer and finished goods from manufacturer to customer. The information from customer orders and forecast move upstream in the chain to the end of chain to suppliers. The financial flow includes payment from customer and manufacturers against supplied goods and materials.

In SCM the goal is to manage the chain efficiently as possibly to minimize cost and maximize revenue. Efficiency need to understand in many different ways in SCM. Efficient supply chain has short enough lead time to fulfil customer need and still it does not have any extra stocks any point of the chain.

Environments in different industries vary very much. Because of this, supply chain management differs depending on the industry. Industries, like pharma, has very long lead times and due to this it is mandatory to hold stocks in different points of the chain to fulfil customer need with high service level. In daily consumer good industry lead times are short and raw materials turn into finished product and are used very fast.

To manage supply chain more efficiently many companies use ERP and SCM software to handle their three flows accurately and also to share information though the supply chain. Some kind of software is almost mandatory for bigger companies to handle their activities.

SCM very complex thing with huge amount of variables which need to be taken in account. Supply chains are developing more complex as competition tightens all the time. Get the best information for your work here.