the globalization of businesses, organizations have been forced to
devise effective ways to manage the seamless flow of products and
services into and out of the company. Reliably and quickly delivering
defect-free products to consumers is no longer a competitive advantage
but a requirement to sustain in the market. Both companies and
distribution channels strive for time and quality, and supply chain
management becomes a necessity for businesses in such a scenario.
Increased performance-based competition, along with rapidly changing
economic conditions and technology, are leading to uncertainty in the
market that requires great flexibility from companies and distribution
channels. All these factors necessitate the significance of supply chain
What Is Supply Chain Management (SCM)?
chain management is managing the goods and services flow, including all
processes that convert raw materials into end products. It comprises
controlling and reducing costs and avoiding supply shortages to optimize
customer value and gain a competitive advantage in the market. The
process contains integrated planning and implementation of the processes
required to optimize the flow of material and resources into functions
that include demand planning, sourcing, production, inventory
management, and logistics. Companies can use specialized supply chain
management software and business strategy to develop a competitive
How Does Supply Chain Management Work?
chain management is a supplier's effort to develop and implement
efficient and economical supply chains. It includes everything from
production to product development and the information system needed to
handle these processes. Its essential task is to centrally control the
supply chain and establish a link between all the processes, from
production to shipment and the distribution of the products. SCM works
on the idea that every product released in the market is the effort of
all the organizations that make up the supply chain. However, the
workflow of SCM can be categorized as product management, information
management, and financial management. Any business which is a part of
the supply chain works in any of these categories. The different
varieties of SCM workflow are described below:
This workflow comprises storage, product delivery, and timely formation
of products along the supply chain, and it also conducts quality
assurance at each product location.
This workflow includes sending and receiving sales and purchase orders
and updating the delivery status. This workflow needs to run smoothly
because all other workflows rely on accurate information transmitted
through the supply chain.
Finances - This workflow is related to billing, inventory management, payments, credit terms, and other finance-related workflows.
Components of Supply Chain Management
centrally controls a product's production, shipment, and distribution.
Supply chain management allows companies to reduce costs and quickly
deliver products to the consumer by having reasonable control over
company vendors' inventories, production, distribution, sales, and
The components of SCM include:
Planning implies managing all resources the company requires to
manufacture a product or service to meet customer demand. After
establishing the supply, chain company needs to determine metrics to
know whether its supply chain is effective and delivers value to
customers, or not and meets its goals.
a component of the supply chain in which a company selects a supplier
to deliver the goods and services required to manufacture the product.
After this, key processes are established, like ordering, receiving,
inventory managing, and authorizing supplier payments to manage and
monitor supplier relationships.
The activities are organized that are essential for sourcing raw
materials, product manufacturing, quality testing, packaging, and for
delivery schedule. Manufacturing is the heart of the supply chain
management process in which the company transforms raw materials using
machinery, labor, or additional forces. The final product is the result
of the manufacturing process that is further divided into sub-tasks like
assembly, testing, inspection, or packaging.
Delivery and Logistics –
This includes managing customer orders, scheduling deliveries,
dispatching loads, receiving payment, and invoicing customers. After
products are manufactured, and sales are finalized, the company needs to
deliver the products to the customers. The distribution process is
linked with the brand image; until now, customers have not yet used the
product. A company has robust logistic capabilities and delivery
channels in a strong supply chain management process to ensure product
safety and timely and inexpensive delivery.
Company creates a process to take back excess, unwanted, or defective
products. The SCM planner’s responsibility does not end after the
delivery of the product, as they require creating a network supporting
returning of products. Returning is either scraping or re-producing a
defective product or simply returning a product to the warehouse. A
flexible network should be created that should support customer needs.
Why Is Supply Chain Management Important?
is essential because it minimizes cost and reduces waste and time in
the production cycle. Today just-in-time supply chain has become an
industry norm, where retail sales automatically signal replacement
orders, and retail shelves can be restocked immediately after the
product is sold. Effective supply chain management increases the value
of the supply chain cycle in the following ways:
minimizes the overall costs and increases the efficiency of carried-out
processes by ensuring that manufacturing facilities receive a timely
shipment of raw materials. This further avoids delays in production and
- An effective SCM strategy eliminates the need
for an expensive warehouse because it ensures faster delivery of goods
from the manufacturers to the customers.
- It allows businesses
to predict stock shortage before it happens by using data like the
number of stocked orders and reorder frequency.
- It also ensures that customers are provided with the right amount of products at suitable locations at the right time.
Supply Chain Management Examples
Some examples of SCM across different sectors:
businesses develop well-planned supply chains to remain competitive in
an industry. Retailers in their supply chain usually link with generic
manufacturers producing and selling unbranded products. They use
vendor-managed inventory systems to manage warehouse products and
associate with suppliers capable of meeting the quantity and frequency
of orders at the lowest price. They control delivery to diverse
locations through internal transportation networks or external
providers. At last, they put the label on the final product and sell
those products in their retail store.
E-commerce Company operates a website to sell various products. When a
customer places a product order, it gets processed through a checkout
cart, an order system, or a third-party product like Shopify. Payment
processors then deal with the payment transactions for the order,
opening up a new supply chain. When a customer orders a product is
placed, the warehouse receives the order and ensures that the product is
ready for delivery. The e-commerce company can have its warehouse or a
third-party logistics provider. The order is then transferred from the
warehouse to the shipping company, and after shipping, the product is
shipped to the customer's address.
The Role of Supply Chain Management Software
Supply-chain-management software is a tool that is used to execute supply-chain transactions,
manage supplier relationships, and control associated business
processes. It also automates and optimizes the range of activities that
plan, control, and execute product flows in manufacturing industries.
The software coordinates the entire or part of the flow of products and
improves the accuracy of supply chain activities. The role of supply
chain management software is to coordinate the flow of products
efficiently and cost-effectively. Some significant role of the software
- This business tool helps in managing the supply chain with better efficiency.
- It streamlines supply chain operations from start to finish.
- It tracks and manages the availability of raw materials, stocked goods, or spare parts.
automates purchase order processes like generating and tracking
purchase orders, scheduling supplier deliveries and creating pricing.
- It coordinates transportation channels, improves delivery performance, and boosts customer satisfaction.
What is green supply chain management?
supply chain management refers to incorporating sustainable
environmental processes into the traditional supply chain. It includes
product design, manufacturing, supplier selection, purchasing material,
distribution, and end-of-life management. The process involves value
addition or value creation through the operations of the whole chain.
The primary objective of green supply chain management is to reduce air,
water, and waste pollution. It enhances firms' performances in terms of
less waste, reuse, and recycling of products, reduction in
manufacturing costs, and greater customer satisfaction.
What is the supply chain cycle?
supply chain cycle is a sequence of stages to get a finished product or
service to the customer. The steps include sourcing raw materials,
moving raw materials to production, and then transporting the finished
goods to a distribution center or retail store where they will be
delivered to the consumer.
What are the types of supply chain management?
The different types of supply chain management include:
- Continuous flow
- Fast chain
- Efficient chain
What is the main role of supply chain management?
primary role of SCM is to ensure that customer demand is met with the
product's supply. Its primary role is to ensure that the companies never
produce insufficient or extra products. Some of the critical functions
of supply chain management include:
- Reduce production cost
- Increase customer service
- Improve product quality
- Improve financial position
- Develop best marketing strategies
What are the benefits of a supply chain?
supply chain is a system of producing and delivering a product or
service that includes sourcing raw materials from the right source to
the final delivery of products to the end consumers. An adequate supply
chain is vital for business performance and has many benefits. The
supply chain is the business lifeline and keeps all the workflow
processes organized and efficient. Some of the key benefits include:
- Better flow of products, materials, and information
- Better data visibility
- Reduced cost
- Increased customer satisfaction
- Effective inventory management
- Improved quality control