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Supply Chain Management

Supply chain management (SCM) involves managing the flow of goods and services from raw materials through production and distribution to the end customer. It aims to streamline processes to maximize customer value. SCM encompasses five key parts - planning, sourcing materials, manufacturing, delivering products to customers, and managing returns. By coordinating these parts, SCM helps companies cut costs, improve quality and customer service, and gain a competitive advantage.

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174 views6 pages

Supply Chain Management

Supply chain management (SCM) involves managing the flow of goods and services from raw materials through production and distribution to the end customer. It aims to streamline processes to maximize customer value. SCM encompasses five key parts - planning, sourcing materials, manufacturing, delivering products to customers, and managing returns. By coordinating these parts, SCM helps companies cut costs, improve quality and customer service, and gain a competitive advantage.

Uploaded by

Zehra Abbas rizvi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Supply Chain Management (SCM):

How It Works and Why It Is Important

“ The management of the flow of goods and services and includes all processes that transforms
raw material into final products “

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.

 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 and more efficiently.
 Good supply chain management keeps companies out of the
headlines and away from expensive recalls and lawsuits. 
 The five most critical elements of SCM are developing a strategy,
sourcing raw materials, production, distribution, and returns.
 A supply chain manager is tasked with controlling and reducing
costs and avoiding supply shortages.

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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.

5 Parts of SCM
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 the 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. In SCM,
the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of the following five parts.

1.Planning

To get the best results from SCM, the process usually begins with planning
to match supply with customer and manufacturing demands. Firms must
predict what their future needs will be and act accordingly. This relates to
raw materials needed during each stage of manufacturing, equipment
capacity and limitations, and staffing needs along the SCM process. Large

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entities often rely on ERP system modules to aggregate information and
compile plans.

2.Sourcing

 Efficient SCM processes rely very heavily on strong relationships


with suppliers. Sourcing entails working with vendors to supply the
raw materials needed throughout the manufacturing process. A
company may be able to plan and work with a supplier to source
goods in advance. However, different industries will have different
sourcing requirements. In general, SCM sourcing includes ensuring:

 the raw materials meet the manufacturing specification needed for


the production of goods.
 the prices paid for the goods are in line with market expectations.
 the vendor has the flexibility to deliver emergency materials due to
unforeseen events.
 the vendor has a proven record of delivering goods on time and in
good quality.

Supply chain management is especially critical when manufacturers are


working with perishable goods. When sourcing goods, firms should be
mindful of lead time and how well a supplier can comply with those needs.

3.Manufacturing

At the heart of the supply chain management process, the company


transforms raw materials by using machinery, labor, or other external
forces to make something new. This final product is the ultimate goal of the
manufacturing process, though it is not the final stage of supply chain
management.

The manufacturing process may be further divided into sub-tasks such as


assembly, testing, inspection, or packaging. During the manufacturing
process, a firm must be mindful of waste or other controllable factors that
may cause deviations from original plans. For example, if a company is
using more raw materials than planned and sourced for due to a lack of
employee training, the firm must rectify the issue or revisit the earlier
stages in SCM.

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4.Delivering

Once products are made and sales are finalized, a company must get the
products into the hands of its customers. The distribution process is often
seen as a brand image contributor, as up until this point, the customer has
not yet interacted with the product. In strong SCM processes, a company
has robust logistic capabilities and delivery channels to ensure timely,
safe, and inexpensive delivery of products.

This includes having a backup or diversified distribution methods should


one method of transportation temporarily be unusable. For example, how
might a company's delivery process be impacted by record snowfall in
distribution center areas?

5.Returning

The supply chain management process concludes with support for the
product and customer returns. Its bad enough that a customer needs to
return a product, and its even worse if its due to an error on the company's
part. This return process is often called reverse logistics, and the company
must ensure it has the capabilities to receive returned products and
correctly assign refunds for returns received. Whether a company is
performing a product recall or a customer is simply not satisfied with the
product, the transaction with the customer must be remedied.

Many consider customer returns as an interaction between the customer


and the company. However, a very important part of customer returns is
the intercompany communication to identify defective products, expired
products, or non-conforming goods. Without addressing the underlying
cause of a customer return, the supply chain management process will
have failed, and future returns will likely persist.

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SCM vs. Supply Chains
A supply chain is the network of individuals, companies, resources,
activities, and technologies used to make and sell a product or service. A
supply chain starts with the delivery of raw materials from a supplier to a
manufacturer and ends with the delivery of the finished product or service
to the end consumer.

SCM oversees each touchpoint of a company's product or service, from


initial creation to the final sale. With so many places along the supply chain
that can add value through efficiencies or lose value through increased
expenses, proper SCM can increase revenues, decrease costs, and
impact a company's bottom line.

Why Is Supply Chain Management Important?


Supply chain management is important because it can help achieve
several business objectives. For instance, controlling manufacturing
processes can improve product quality, reducing the risk of recalls and
lawsuits while helping to build a strong consumer brand. At the same time,
controls over shipping procedures can improve customer service by
avoiding costly shortages or periods of inventory oversupply. Overall,
supply chain management provides several opportunities for companies to
improve their profit margins and is especially important for companies with
large and international operations.

How Are Ethics and Supply Chain Management


Related?
Ethics has become an increasingly important aspect of supply chain
management, so much so that a set of principles called supply chain ethics
was born. Consumers and investors are invested in how companies
produce their products, treat their workforce, and protect the environment.
As a result, companies respond by instituting measures to reduce waste,
improve working conditions, and lessen the impact on the environment.

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