What is Supply Chain Management?
A supply chain is a series of processes that transform raw materials into the final product. Supply chain management is a process by which organisations achieve an efficient and cost-effective supply chain. It can be defined as management of the flow of materials, products and services. It is the centralised management of all the processes, people and organisations involved in a supply chain.
How does it help a business?
Supply chain management helps in the financial success of an organisation by incorporating all important activities and financial aspects. Along with value creation for their customers, organisations can achieve a better delivery mechanism and cost-efficient products.
Identifying issues before they occur helps in risk management and better forecasts enable a business to meet stretched targets. Reconciliation of demand and supply plans help in effective business planning.
Components of supply chain management
Supply chain management begins with the planning of product and ends with its successful delivery to the customer, enabling a route for return of unaccepted or defected products. The components of supply chain management are: Plan, Source, Make, Deliver, Return.
Supply Chain Management (SCM) has changed a lot since it was first introduced; it has several internal and external dimensions. Internal dimension includes internal processes related to a supply chain like product design, sourcing, production, transportation, storage, distribution, retail and finances. Internal dimensions can be controlled to an extent.
External dimensions include the changes over which a company doesn’t have much control. These dimensions include unexpected changes in the business environment, rules & regulations and weather constraints etc.
Benefits of supply chain management
- On-time and in-full delivery of products/services
- Minimum waste and improved efficiency
- Reduction in cost: operations, warehousing, transportation, etc.
- Improved customer service
- Better inventory management
- Keeps the business ready for changes in market
- Identification of future risks and opportunities
SCM, if done right, helps in adjusting a supply chain to deliver optimum performance. It helps in managing multi-faceted supply chains in an efficient way.