Supply Chain Management (SCM) is a management practice that governs the movement of goods and services inside or outside the organisation. Effective SCM needs various decisions regarding the flow of information, products, and finances. SCM includes all methods that convert raw materials into finished goods, it comprises the designing, planning, executing, controlling and monitoring of all activities within the supply chain.
Effective SCM has three main phases, namely:
- Supply Chain Design/Strategy phase,
- Supply Chain Planning phase,
- Supply Chain Operations phase.
Supply Chain Design / Strategy phase
In the first phase, the organisation decides how to define the supply chain in the years to come. The supply chain is configured in terms of allocation of resources, the methodology of production, warehousing, and different modes of transportation. All these decisions related to the supply chain are typically made for the long term.
Supply Chain Planning phase
In the second phase, organisations prepare to incorporate flexibility into the supply chain in order to optimise their performance. This phase also includes inventory decisions & allocation, in-time production, production for customised orders and the allocation of transport mode for each product. Benchmarking of operations, strategies against market competitors and the application of best practices throughout the organisation are included in this phase. Supply chain planning decisions are generally made for weeks or months.
Supply Chain Operations phase
The third and last decision phase comprises planning, daily or weekly production and distribution of products. The planning of inbound & outbound operations (within & outside the organisation) is done in this phase. It includes setting the delivery schedules and transportation modes with the suppliers, manufacturing units and distribution centres.
Strong decision phases result in successful supply chain management. Well-informed decisions regarding the designing, planning, and functioning of a supply chain progress an organisation towards financial success.