What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and services
and includes all processes that transform raw materials into final products. It
involves the active streamlining of a business's supply-side activities to maximize
customer value and gain a competitive advantage in the marketplace.

How Supply Chain Management (SCM) Works

Supply chain management (SCM) represents an effort by suppliers to develop

and implement supply chains that are as efficient and economical as
possible. Supply chains cover everything from production to product
development to the information systems needed to direct these undertakings.

Five Parts of SCM

In SCM, the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of five parts:

 The plan or strategy

 The source (of raw materials or services)
 Manufacturing (focused on productivity and efficiency)
 Delivery and logistics
 The return system (for defective or unwanted products)

Importance Of Supply Chain Management

1. Reduced Operating Cost
Retailers and manufacturers rely directly on Supply Chain Management to have a
reduced operating cost. Retailers bank on a company’s SCM to sell their products and
services. The business world has become highly competitive and retailers can’t afford to
lose a customer. Right SCM boosts sales.

The same is applicable for manufacturers too. Dell computers were known to take
orders from customers or retailers worldwide, build their specifications and send directly
to them. This, an initiative of Supply Chain Management saved more million dollars. Dell
didn’t have computers lying without use and retailers had no computers lying in
warehouses without being sold.

With a SCM, both sides of market do more.

2. Effective Customer Service

A business or organization’s sole purpose is to meet customers’ needs. Supply Chain
Management manages customer service to ensure demands are met. When a call is
placed to your organization about a product, customer service reaches out to SCM to
ask or investigate what customers want. Customer service 24/7 accessibility is partly
dependent on Supply Chain Management. SCM ensures right delivery, on time delivery
and right delivery

3. Quality Products
Supply Chain Management on the request of customers and high competitive market
increase the quality of products. They believe services and products must be durable
and reliable.

What Are the Types of Supply Chains?

There are many different types of supply chain models available to companies
interested in implementing a strategy to improve efficiency and workflow. The
type of supply chain model a company selects will often depend on how the
company is structured and what its specific needs are. Here are a few examples:

 Continuous Flow Model: This traditional supply chain model works well for
companies that produce the same products with little variation. The
products should be in high demand and require little to no redesign. This
lack of fluctuation means managers can streamline production times and
keep tight control over inventory. In a continuous flow model, managers
will need to continuously replenish raw materials in order to prevent
production bottlenecks.
 Fast Chain Model: This model works best for companies that sell products
based on trends that may have a limited time appeal. Businesses that use
this model need to get their products to market quickly to take advantage
of the prevailing trend. They need to rapidly move from idea to prototype to
production to consumer. Fast fashion is an example of an industry that
uses this supply chain model.
 Flexible Model: Companies that manufacture seasonal or holiday
merchandise often use the flexible model. These companies experience
surges of high demand for their products followed by long periods of little
to no demand. The flexible model ensures they are able to gear up quickly
to begin production and shut down efficiently as soon as demand tapers
off. In order to be profitable, they must be accurate in forecasting their raw
materials, inventory, and labor costs.
Goal Of Scm
The purpose of the supply chain is to make product available to meet customer demand – and that
includes delivery to the appropriate location, on time, in sufficient quantity. Supply chain management is
focused on doing that in the most efficient and effective way. Everything else is of secondary
importance.

I think we can all agree that the objective of the supply chain is to make product available to meet
demand. A number of strategies can be employed to pursue that objective, and individual participants
and managers must all be aware of, and properly incented toward, the strategy and the goal. And
measurements must reflect supply chain dynamics and relationships. That’s what ties individual
performance to that ultimate goal.