Supply Chain Management (SCM)

(definition)

 Supply chain management is the handling of entire production flow of a good or service - starting
form the raw components all the way to delivering the final product to the consumer.
 To accomplish this task, a company will create a network of suppliers (the “links” in the chain) that
move the product along from the supliers of raw materials to the organizations who deal directly
with users.
 is the connected network of individuals, organizations, resources, activities, and technologies
involved in the manufacture and sale of a product or service.
 A supply chain starts with the delivery of raw materials from a supplier to a manufacturer and
ends with the delivery of the finished product or service to the end consumer.

KEY TAKEWAYS

 Supply chain management (SCM) is the centralized management of the flow of goods and services
and includes all processes that transform raw materials into final products.
 By managing the supply chain, companies are able to cut excess costs and deliver products to the
consumer faster.
 Good supply chain management keeps companies out of the headlines and away from expensive
recalls and lawsuits.

The concept of Supply Chain Management (SCM) is based on two core ideas:

1. The first is that practically every product that reaches an end user represents the culminative effort
of multiple organizations. These organizations are referred to collectively as the supply chain.

2. The second idea is that while supply chains have existed for a long time, most organizations have
only paid attention to what was happening within their “four wall”. Few businesses understood, much
less managed, the entire chain of activities that ultimately delivered products to the final customer.
The result was disjointed and often ineffective supply chains.

 The organizations that make up the supply chain are “linked” together through physical flows and
information flows.

Physical Flows - involve the transformation movement, and storage of goods and materials. They are
the most visible piece of the supply chain. But just as important are information flows.

Information Flows - allow the various supply chain partners to coordinate their long-term plans, and
to control the day-to-day flow of goods and materials up and down the supply chain.

How Supply Chain Management Works

 Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a
product. By managing the supply chain, companies are able to cut excess costs and deliver
products to the consumer faster. This is done by keeping tighter control of internal inventories,
internal production, distribution, sales, and the inventories of company vendors.
  By analyzing partner data, Perkins and Wailgum identify three (3) scenarios where effective
supply chain management increasses value to the supply chain cycle:

 Identifying potential problems. When a customer orders more product than the manufacturer
can deliver, the buyer can complain of poor service. Through data analysis, manufacturers may be
able to anticipate the shortage before the buyer is disappointed.

 Optimizing price dynamically. Seasonal products have a limited shelf life. At the end of the
season, these products are typically scrapped or sold at deep discounts. Airlines, hotels, and
others with perishible “products” typically adjust prices dynamically to meet demand. By using
analytic software, similar forecasting techniques can improve margins, even for hard goods.

 Improving the allocation of “available to promise” inventory. Analytical software tools help to
dynamically allocate resources and schedule work based on the sales forecast, actual orders and
promised delivery of raw materials. Manufacturers can confirm a product delivery date when the
order is placed - significantly reducing incorrectly - filled orders.

How Do Businesses Manage their Supply Chain

 Supply chain management is a consious effort to run supply chains in the most efficient and
effective way possible. Such strategies include product development, sourcing, production and
logistics, each of which assists in creating quality products and coordinating their flow to the
consumer.
 The supply chain exists in many different forms, but the most common structure contains four
separate entities:

1. Suppliers. These entities provide the materials needed to create the product, whether they’re raw
materials or individual parts to a finished product.
For example: Apple’s iPad comes from a variety of suppliers: Samsung manufacturers its processor
chips, LG produces the touchscreen display, and Toshiba creates the flash memory.

2. Manufacturers. This stage of the supply chain entails bringing together all of the parts provided by
suppliers to create the finished product. Apple would take each individual part from the suppliers and
put them together to create a finished iPad for distribution.

3. Distributors. These entities store and sell the finished product, either at a physical storefront or
through an online store. Locations like Apple stores and Walmart provide physical locations where
consumers can buy an iPad, whereas online distributors ship the iPad directly to a consumer’s door.

4. Customers. Comsumers create demand for a producra and ultimately influence the quantity of
products and the overall supply chain structure.