What is Supply Chain Management?

By understanding the fundamentals of Supply Chain Management (the components, benefits, challenges and how to optimize it for efficiency and cost savings), companies can develop an effective supply chain operation, which can be the key to long-term success.

Supply chain management (SCM) is about bringing a product or service from the source or supplier to the end customer, in a timely and cost-effective manner. It comprices the structuring and execution of processes such as procurement, production, distribution, logistics and supplier management, all of which are linked together and heavily dependent on each other.

• Procurement is the practice of buying raw materials from suppliers and involves developing relationships with a company’s supply partners. 
• Production involves manufacturing goods and services that are then transported to customers or end-users. 
• Distribution is the transport of goods from the point of manufacture to the point of sale. 
• Logistics is the planning and management of the entire chain of operations, from the origin to the destination, to ensure products are delivered on time.
• Supplier Management is ensuring you cooperate with the best suppliers based on your conditions and requirements.

There are of course many advantages to having a well thought out supply chain strategy, such as decreased costs, improved customer service, better lead time management and minimized inventory costs, but it doesn’t come without challenges. In order to achieve an effective supply chain strategy, companies must develop a robust infrastructure and processes with clear objectives, strong supplier relationships, and continuously monitor performance. Moreover, companies must also ensure that their supply chain tools are up-to-date and can support the demands of their business. 

Want to learn more about this topic?  Check out this article about different perspectives and approaches, or this great article provided by IBM.