The answer to defining what is supply chain management (SCM) happens here: SCM is a great concoction of art and science that gets into improving the way an organisation explores the raw components it needs to create a product or service and deliver it to customers to their satisfaction. Supply chain management constitutes a conscious effort on the behalf of the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities include everything ranging from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities more effectively and synchronously. Supply chain management is a cross-functional approach that strives to managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer. For anyone seeking an explanation as to what is supply chain management the above paragraph actually outlines to answer that.
The organizations that constitute the supply chain practises within them are “conjoined” together through the usage of physical and information flows. Physical flows relates to involving the transformation, movement, and storage of goods and materials. In fact they represent the most visible piece of the supply chain action. In the same way the presence of information flows is also important and not to be ignored. Information flows creates a platform for the various supply chain partners to coordinate and collaborate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain pathway.
The supply chain concept vastly extends to include a focus on production and involves both the supply and distribution sides of the company. As this chain elongates, the distance of separation between the manufacturer and the end consumer increases, this extension can be applied to both geographically and from an operational point of view. At the same time, there is a strong trend to focus towards more and more customer-oriented products and production, which requires closer relationships between suppliers and customers.
Supply chain management draws a lot of framework from industrial engineering, operations management, logistics, procurement, IT & systems engineering. One of the ultimate goals of any effective supply chain management system is to reduce inventory (with the assumption that products are available whenever needed).
The following are five basic components that constitute SCM to better understand what is supply chain management.
1. Plan: The primary aspect is the planning which deals more with the strategic portion of SCM. Any organisation needs a strategy for managing all the resources that shall have to go a long way towards meeting the customer demands for their product or service offered to them. A major chunk of SCM planning goes towards developing a set of metrics and KPIs to continually monitor the supply chain so that it is efficient costs affordable and delivers a high quality and value to the end customers. This is one step that provides insights to the question what is supply chain management.
2. Source: Once the planning phase is sorted the next stage that comes to be addressed is that, companies must choose suppliers to deliver the goods and services they need to create their product for their customer needs or demands that arise in the market where the product shall be available. Therefore, supply chain managers must sit and chalk a set of pricing, delivery and payment process mechanisms with suppliers and create metrics for monitoring and improving the relationships. This is one important step that helps us to know what is supply chain management better. After that is done, SCM managers can put together processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments.
3. Make: This is actually the stage where the manufacturing step commences. The supply chain managers begin to schedule the activities necessary for production related work, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chain—one where companies are able to measure quality levels, production output and worker productivity.
4. Deliver: This portion is that part that many SCM insiders refer to as logistics. This is the portion wherein companies coordinate the receipt of orders from customers that has been come from various channels (e-mail, phone call, chat enquiry or a store walk in/ bulk orders), develop a network of warehouses that can happen by either setting them up directly or by leasing the warehouse space in the desired strategic locations, pick carriers to get products from these warehouse spaces and ship it to customers and set up an invoicing system to receive payments soon after delivery. This stage almost gives a complete answer to what is supply chain management.
5. Return: This stage in supply chain management shall be another area that needs to be encountered as a pro-active measure and sometimes can be the problematic part of the supply chain for many companies. Supply chain planners have to create records to capture the customer issues, responses and flexible network for receiving defects and excess products back from their customers and supporting customers who have problems with delivered products to better facilitate to ensuring that the supply chain link is effectively functioning.
Organizations increasingly ask this question what is supply chain management all about, or have to create networks, to compete in the global market and networked economy. Firms with geographically more extensive supply chains connecting diverse trading cliques tend to become more innovative and productive. To answer the question what is supply chain management better: Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. Supply chain Consulting is a service involved in transfer of knowledge on how to exploit existing assets through improved coordination and can hence be a source of competitive advantage; Hereby the role of the consultant is to help management by adding value to the whole process through the various sectors from the ordering of the raw materials to the final product.
On this regard, firms either build internal teams of consultants to tackle the issue or use external ones, (companies choose between these two approaches taking into consideration various factors).
The use of external consultants is a common practice among companies. The whole consulting process generally involves the analysis of the entire supply-chain process, including the countermeasures or correctives to take to achieve a better overall performance. This way we have now understood better what is supply chain management?