At the most fundamental level, supply chain management (SCM) is management of the flow of goods, data, and finances related to a product or service, from the procurement of raw materials to the delivery of the product at its final destination.
Supply chain activities span procurement, product lifecycle management, supply chain planning (including inventory planning and the maintenance of enterprise assets and production lines), logistics (including transportation and fleet management), and order management. SCM can also extend to the activities around global trade, such as the management of global suppliers and multinational production processes.
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Intelligent SCM has other advantages, too. For instance, it can free up supply chain employees to contribute to the business in ways that add more value. Better SCM systems that automate mundane tasks can equip supply chain professionals with the tools they need to successfully deliver the products and services the supply chain is designed around.
Challenges in the supply chain extend beyond efficiency and cost management issues. Changing circumstances can impact regulatory compliance as well. Your SCM system must be flexible enough to mitigate all the impacts that are generated by changes in the supply chain, including changing and varied regulatory requirements. An intelligent SCM system can help you be more efficient and reduce costs while remaining compliant with a variety of ever-changing legal mandates.
In the past, supply chain planning has been a periodic business exercise. Heading into the future, it will be continuous. Future SCM systems will also bring tighter alignment between planning and execution, which is not a current state for most enterprises. The need for speed and accuracy in SCM is only going to increase. Make sure your supply chain is ready for the future by supporting it with an intelligent SCM system.
Effective supply chain management systems minimize cost, waste and time in the production cycle. The industry standard has become a just-in-time supply chain where retail sales automatically signal replenishment orders to manufacturers. Retail shelves can then be restocked almost as quickly as product is sold. One way to further improve on this process is to analyze the data from supply chain partners to see where further improvements can be made.
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, control over shipping procedures can improve customer service by avoiding costly shortages or periods of inventory oversupply. Overall, supply chain management provides multiple opportunities for companies to improve their profit margins and is especially important for businesses with large and international operations.
In commerce, supply chain management (SCM) deals with a system of procurement (purchasing raw materials/components), operations management (ensuring the production of high-quality products at high speed with good flexibility and low production cost), logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers.[2][3] A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally".[4][5] This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.[6]
Although it has the same goals as supply chain engineering, supply chain management is focused on a more traditional management and business based approach, whereas supply chain engineering is focused on a mathematical model based one.[13]
Supply chain management, techniques with the aim of coordinating all parts of SC, from supplying raw materials to delivering and/or resumption of products, tries to minimize total costs with respect to existing conflicts among the chain partners. An example of these conflicts is the interrelation between the sale department desiring to have higher inventory levels to fulfill demands and the warehouse for which lower inventories are desired to reduce holding costs.[14]
In 1982, Keith Oliver, a consultant at Booz Allen Hamilton, introduced the term "supply chain management" to the public domain in an interview for the Financial Times.[15] In 1983 WirtschaftsWoche in Germany published for the first time the results of an implemented and so called "Supply Chain Management project", led by Wolfgang Partsch.[16]
In the late 1990s, "supply chain management" (SCM) rose to prominence, and operations managers began to use it in their titles with increasing regularity.[18][19][20] A supply chain, as opposed to supply chain management, is a set of firms who move materials "forward",[21] or a set of organizations, directly linked by one or more upstream and downstream flows of products, services, finances, or information from a source to a customer. Supply chain management is the management of such a chain.[17]
Supply chain visibility, in its origins, was concerned with knowledge of the location/production stage and expected delivery date of incoming products and materials, so that production could be planned,[26] but the development of the term has enabled it to be used to plan orders using knowledge of potential supplies, and to track post-production processes as far as delivery to customers.[27]
Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships, and control associated business processes.[28] The overall goal of the software is to improve supply chain performance by monitoring a company's supply chain network from end-to-end (suppliers, transporters, returns, warehouses, retailers, manufacturers, and customers).[28]
In some cases, a supply chain includes the collection of goods after consumer use for recycling or the reverse logistics processes for returning faulty or unwanted products back to producers up the value chain.[29]
Supply chain management is a cross-functional approach that includes 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. As organizations strive to focus on core competencies and become more flexible, they reduce ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners lead to the creation of the concept of supply chain management.[30] Supply chain management is concerned with improving trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.[31][32]
Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy.[33] In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.
In recent decades, globalization, outsourcing, and information technology have enabled many organizations, such as Dell and Hewlett-Packard, to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities.[34] This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories.[35] It is not clear what kind of performance impacts different supply-network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms.[36] Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance.[37]
In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances, and business partnerships, significant success factors were identified, complementing the earlier "just-in-time", lean manufacturing, and agile manufacturing practices.[38][39][40][41] Second, technological changes, particularly the dramatic fall in communication costs (a significant component of transaction costs), have led to changes in coordination among the members of the supply chain network.[42]
Many researchers have recognized supply network structures as a new organizational form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System".[43][44][45] In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration".[46] 2351a5e196
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