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A supply chain is comprised of all the businesses and individual contributors involved in creating a product, from raw materials

to finished merchandise. Examples of supply chain activities include farming, refining, design, manufacturing, packaging and transportation. Retail companies become involved in supply chain management in order to control product quality, inventory levels, timing, and expenses. In a global economy, supply chain management often includes dealings with companies and individual contributors in other countries, which requires involvement in politics, trade and tariff laws, quality control, and international relationships. Because global supply chains are both logistically and technologically complicated, there are now global supply chain management specialists and firms who oversee the process for many different retail companies. An example of how U.S. retail industry companies are involved with supply chain management was demonstrated by Wal-Mart when it announced its plans for developing a sustainability system for the products sold in its stores, and environmental accountability from all parties involved in its supply chain. Walmart's Sustainability Index and Supply Chain Green Standards An example of what happens when the supply chain is neglected or mismanaged was the global toy recall by Mattel in 2007. After it was discovered that some toys manufactured in China contained toxic lead paint and a design flaw which caused a safety hazard, Mattel had to recall 20 million toys that had been distributed and sold around the world.

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What It Is: Supply chain management (SCM) is the central organization of a company's production resources and materials intended to streamline the production process and reduce costs on a continuing basis. How It Works/Example: A company's production operation contains material input components, each of which incurs a cost which is recovered in the price of the finished product. Much of market competition is based on keeping the prices of finished products as low as possible without sacrificing quality. For this reason, supply chain management (SCM) attempts to bridge this gap effectively by closely monitoring the cost a company pays for materials and from whom the materials are being procured. In addition, SCM monitors the operational procedures from start to finish in order to identify costly and unnecessary procedural steps.

Why It Matters: The activities comprised in SCM help a company to increase the efficiency of its production cycle while placing downward pressure on its costs as safeguard to maintain, and, where possible, increase profitability