What is Supply Chain Management (SCM)?
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.
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 cumulative 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 walls.” 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.
Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer. As organizations strive to focus on core competencies and become more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners lead to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners thus improving inventory visibility and the velocity of inventory movement.
• It helps the organization to manage their supply chain process in a dynamic environment.
• SCMS process helps suppliers, customers, and business partners connect with each other to manage supply chain process effectively and efficiently.
• It helps organizations to accelerate and optimize end-to-end procure-to-pay process.
• SCMS allows an organization to integrate their processes and enforce contract compliance for supply-side and supplier-side requirements throughout using supply chain processes in distributed environment.
• It will cover the key processes- Supply Chain networking, supply chain planning and coordination, and supply chain execution.
• Reduce accounts receivable collections with better visibility into the AR process, aging, and extension of credit and consequently, help to reduce the day’s sales outstanding.
• Effectively use Net Fixed assets NFA like plants and equipment.
• To meet customer demands, you can smartly plan and manage Supply Chain Management process in an organization.
• Proper inventory optimization, order fulfillment, and shipping of the goods.
• Distribution of the key information to all the stakeholders spread across the network.
• Improve communication and collaboration between different business lines to manage demand and supply process in an organization.