Supply chain management (SCM) is the broad range of activities required to plan, control and execute a product's flow, from acquiring raw materials and production through distribution to the final customer, in the most streamlined and cost-effective way possible.
It focuses on moving a product or material in the most efficient way so it arrives at the right place at the right time.
It manages activities such as packaging, transportation, distribution, warehousing and delivery.
In contrast, SCM involves a more expansive range of activities, such as strategic sourcing of raw materials, procuring the best prices on goods and materials, and coordinating supply chain visibility (SCV) efforts across the supply chain network of partners, to name just a few.
Supply chain management produces benefits such as new efficiencies, higher profits, lower costs and increased collaboration. SCM enables companies to better manage demand, carry the right amount of inventory, deal with disruptions, keep costs to a minimum and meet customer demand in the most effective way possible. These SCM benefits are achieved through the appropriate strategies and software to help manage the growing complexity of today's supply chains.
Importance of supply chain management
The impact of benefits, such as those discussed above, are what make SCM important to both the enterprise and consumer.
SCM can increase customer satisfaction by delivering products to consumers on time and providing fast service and support whenever needed. By increasing customer satisfaction levels, enterprises are able to build and improve customer loyalty, making the boost in customer service important for both the customer and business.
The SCM activities
It can reduce purchasing cost, production cost and total supply chain cost. By lessening operating costs, SCM is also able improve a company's financial position. The reduced supply chain costs can greatly increase a business's profits and cash flow.
Furthermore, SCM can diminish the use of large fixed assets -- such as warehouses and transportation vehicles -- by allowing supply chain experts to redesign their network in order to properly serve and operate with five warehouses instead of eight, reducing the cost of owning an additional three facilities.
SCM can help ensure human survival by improving healthcare, protecting humans from climate extremes and sustaining human life.
The supply chain is also vital to the delivery of electricity to homes and businesses, providing the energy needed for light, heat, air conditioning and refrigeration.
The most basic version of a supply chain includes a company, its suppliers and the customers of that company. The chain could look like this: raw material producer, manufacturer, distributor, retailer and retail customer.
Technology is critical in managing today's supply chains, and ERP focus on relevant areas. There are also business software vendors that focus specifically on SCM.
A few important areas to note include:
Supply chain planning software for activities such as demand management.
Supply chain execution software for activities such as day-to-day manufacturing operations.
Inventory management software for tasks such as tracking and optimizing inventory levels.
Warehouse management systems for activities related to warehouse operations.
Infor, JDA Software, Oracle, SAS and SAP are well-known supply chain software.
Technology -- especially big data, predictive analytics, internet of things (IoT) technology, supply chain analytics, robotics and autonomous vehicles -- is also being used to help solve modern challenges, including in the areas of supply chain risk and disruption and supply chain sustainability.
Example
IoT can help with transparency and traceability to help boost food quality and safety by using sensors to monitor the temperature of perishable food while it's in transit.
And analytics can help determine where to put smart lockers in densely populated areas to cut the number of single-item deliveries and lower greenhouse gas emissions.
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