Supply Chain Management

Overview

Supply chain management (SCM) is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.

Definition

The Council of Supply Chain Management Professionals (CSCMP) defines supply chain management as follows:

"Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies."

Importance of Supply Chain Management

Supply chain management is important for businesses to ensure there are minimal waste, drive innovation thereby creating value for their customers. Also, effective supply chain management also reduces total supply chain cost in the long run.

History

The term "supply chain management" was first coined by Keith Oliver in 1982. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.

Components of Supply Chain Management

Supply chain management is composed of two main components: supply chain planning and supply chain execution.

Supply Chain Planning

Supply chain planning includes the selection of vendors, determination of delivery and payment terms, the strategic selection of logistics partners, and the effective management of other factors in efficient supply chain management.

Supply Chain Execution

Supply chain execution means managing and coordinating the movement of goods, information, and funds across the supply chain. The activities associated with this include demand/supply planning, production planning, and inventory management.

Supply Chain Management Processes

Supply chain management is an encompassing process that involves many different aspects of business. Some of the main processes include:

Customer Relationship Management

Managing the relationship with customers is a critical aspect of supply chain management. This involves understanding customer needs, developing appropriate products, and delivering them in a timely and efficient manner.

Supplier Relationship Management

Just as with customers, managing the relationship with suppliers is critical in supply chain management. This involves identifying and sourcing the best suppliers, negotiating contracts, and ensuring timely delivery of goods.

Manufacturing Flow Management

This process involves managing the production process to ensure that goods are produced efficiently and effectively. This includes managing production schedules, ensuring quality control, and managing inventory levels.

Product Development and Commercialization

This involves the process of bringing a new product to market. This includes everything from product design and development, to testing, to marketing and sales.

Returns Management

Managing returns is a critical aspect of supply chain management. This involves managing the process of returning defective or unwanted products, and ensuring that these products are dealt with in an efficient and cost-effective manner.

Supply Chain Management Strategies

There are various supply chain management strategies that can be implemented depending on the situation and the company's goals. Some of these strategies include:

Lean Manufacturing

Lean manufacturing is a strategy that focuses on eliminating waste in all forms in the supply chain. This includes waste in materials, time, and effort. The goal of lean manufacturing is to create the most efficient system possible.

Just-In-Time Manufacturing

Just-in-time manufacturing is a strategy that focuses on producing goods just as they are needed in the production process. This reduces the need for storing excess inventory and can help improve efficiency.

Six Sigma

Six Sigma is a strategy that focuses on improving the quality of the output of a process by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes.

Challenges in Supply Chain Management

Supply chain management faces various challenges such as globalization, risk management, cost containment, and talent management. However, with the increasing use of technology, many of these challenges can be overcome.

Future of Supply Chain Management

With the advent of technologies like artificial intelligence, machine learning, and blockchain, the future of supply chain management looks promising. These technologies can help in improving efficiency, reducing costs, and improving customer service.