Supply chain management
What is supply chain management?
Supply chain management (SCM) is the centralized coordination and optimization of all activities involved in the flow of goods, services, information, and finances from raw material sourcing to the delivery of finished products to the end customer. SCM covers planning, sourcing, production, logistics, and returns, aiming to maximize efficiency, reduce costs, and ensure customer satisfaction.
Key takeaways
End-to-end process optimization
SCM integrates and streamlines every step in the product lifecycle-from acquiring raw materials to delivering finished goods-by collaborating with suppliers, manufacturers, distributors, and retailers.
Five core phases
- Planning: Forecasting demand and designing strategies to balance supply with customer needs.
- Sourcing: Selecting and managing suppliers for raw materials and components.
- Production: Transforming inputs into finished products efficiently.
- Distribution: Managing logistics, warehousing, and delivery to customers.
- Returns: Handling product returns, recycling, or disposal.
Efficiency and cost control
Effective SCM reduces operational costs, minimizes waste, and improves inventory management, directly impacting profitability.
Customer satisfaction
Timely and reliable SCM ensures products reach customers quickly and in good condition, boosting satisfaction and loyalty.
Risk management
SCM includes strategies for mitigating risks such as supply disruptions, regulatory changes, and global uncertainties.
Sustainability
Modern SCM emphasizes eco-friendly practices, ethical sourcing, and reducing environmental impact.
Why supply chain management matters?
Effective supply chain management (SCM) gives companies a competitive advantage by enabling them to quickly respond to market changes, optimize costs, and stand out through superior product availability and service. SCM also enhances business resilience by helping organizations anticipate and manage disruptions, ensuring continuity during challenges such as natural disasters or global crises. Additionally, strong SCM promotes collaboration and innovation among supply chain partners, leading to improved quality and shared success.
The supply chain management process
Plan
Develop strategies to meet customer demand efficiently and profitably.
Source
Identify, evaluate, and manage suppliers; negotiate contracts and ensure quality materials.
Make (Production)
Oversee manufacturing or assembly, maintaining quality and efficiency.
Deliver (Distribution)
Manage logistics, warehousing, and transportation to ensure timely delivery.
Return
Handle product returns, recycling, or disposal, and manage reverse logistics.
Impact on business and operations
Cost efficiency: Reduces production and distribution costs
Customer satisfaction: Ensures timely, accurate deliveries and responsive service
Risk mitigation: Prepares for disruptions and maintains business continuity
Sustainability: Supports eco-friendly and ethical business practices
Competitive advantage: Enables faster, more flexible responses to market changes
Real-world examples
Case study: British Sugar
British Sugar connected its factories using IoT and automation to streamline production and warehousing. By integrating advanced warehouse management systems and automated pallet handling, it improved efficiency, reduced costs, and ensured timely delivery, demonstrating the power of modern supply chain management in a competitive industry.
Disclaimer: The information provided in this business glossary is for educational purposes only and should not be considered as financial advice. Always consult with qualified financial professionals before making investment decisions.
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Table of Contents
Supply chain management
What is supply chain management?
Supply chain management (SCM) is the centralized coordination and optimization of all activities involved in the flow of goods, services, information, and finances from raw material sourcing to the delivery of finished products to the end customer. SCM covers planning, sourcing, production, logistics, and returns, aiming to maximize efficiency, reduce costs, and ensure customer satisfaction.
Key takeaways
End-to-end process optimization
SCM integrates and streamlines every step in the product lifecycle-from acquiring raw materials to delivering finished goods-by collaborating with suppliers, manufacturers, distributors, and retailers.
Five core phases
- Planning: Forecasting demand and designing strategies to balance supply with customer needs.
- Sourcing: Selecting and managing suppliers for raw materials and components.
- Production: Transforming inputs into finished products efficiently.
- Distribution: Managing logistics, warehousing, and delivery to customers.
- Returns: Handling product returns, recycling, or disposal.
Efficiency and cost control
Effective SCM reduces operational costs, minimizes waste, and improves inventory management, directly impacting profitability.
Customer satisfaction
Timely and reliable SCM ensures products reach customers quickly and in good condition, boosting satisfaction and loyalty.
Risk management
SCM includes strategies for mitigating risks such as supply disruptions, regulatory changes, and global uncertainties.
Sustainability
Modern SCM emphasizes eco-friendly practices, ethical sourcing, and reducing environmental impact.
Why supply chain management matters?
Effective supply chain management (SCM) gives companies a competitive advantage by enabling them to quickly respond to market changes, optimize costs, and stand out through superior product availability and service. SCM also enhances business resilience by helping organizations anticipate and manage disruptions, ensuring continuity during challenges such as natural disasters or global crises. Additionally, strong SCM promotes collaboration and innovation among supply chain partners, leading to improved quality and shared success.
The supply chain management process
Plan
Develop strategies to meet customer demand efficiently and profitably.
Source
Identify, evaluate, and manage suppliers; negotiate contracts and ensure quality materials.
Make (Production)
Oversee manufacturing or assembly, maintaining quality and efficiency.
Deliver (Distribution)
Manage logistics, warehousing, and transportation to ensure timely delivery.
Return
Handle product returns, recycling, or disposal, and manage reverse logistics.
Impact on business and operations
Cost efficiency: Reduces production and distribution costs
Customer satisfaction: Ensures timely, accurate deliveries and responsive service
Risk mitigation: Prepares for disruptions and maintains business continuity
Sustainability: Supports eco-friendly and ethical business practices
Competitive advantage: Enables faster, more flexible responses to market changes
Real-world examples
Case study: British Sugar
British Sugar connected its factories using IoT and automation to streamline production and warehousing. By integrating advanced warehouse management systems and automated pallet handling, it improved efficiency, reduced costs, and ensured timely delivery, demonstrating the power of modern supply chain management in a competitive industry.
Disclaimer: The information provided in this business glossary is for educational purposes only and should not be considered as financial advice. Always consult with qualified financial professionals before making investment decisions.
Get paid globally. Keep more of it.
No FX markups. No GST. Funds in 1 day.