Supply chain management (SCM) is the handling of the flow of goods and services, from the raw materials through to the consumption by the consumer. Supply chain management incorporates several success factors, which includes a clear procurement strategy, effective control systems and development of expertise.
The supply chain management process requires an organization to have a network of suppliers to move the product through each stage. It’s also not limited to the end of the supply chain, but in fact, relates to the entire procurement cycle.
Why is supply chain management important?
Effective supply chain management improves the financial position of an organization by delivering value, which is linked to the organization’s corporate strategy. Supply chain management plays a significant role in customer satisfaction through the delivery of products and services. Good supply chain management is critical at reducing operating costs in procurement activities, operations, and logistics functions and throughout the whole supply chain. The scale of profitability for large organizations is relative to the management of the supply chain.
Supply chain management also has a lesser publicized societal role – ensuring that the basics necessities humans depend on like, food, energy, medicine, and modern infrastructure are flowing and available.
A concern is that unless we can describe what we do and demonstrate our success to our stakeholders we cannot win their recognition and support.
What are the six components of supply chain management?
The goal of supply chain management is to look holistically at the entire supply chain. From the supplier through to the consumer, supply chain management serves as a function to maximize value from all activities. Supply chain management can be broken down into six key components.