What is a supply chain
Supply Chain Management can be defined as the management of flow of products and services, which begins from the origin of products and ends at the product’s consumption. It also comprises movement and storage of raw materials that are involved in work in progress, inventory and fully furnished goods.
Supply Chain Management (SCM)
A complicated system involving an entire chain of activities, starting from acquiring raw materials from various vendors and suppliers to manufacturing the actual product to packaging and distributing it to wholesalers and retailers to supplying it to the final consumer of the product is called a supply chain. A supply chain management (SCM) system consists of integrating and controlling the flow of information between all the departments of the organization (which includes marketing, sales, finance, manufacturing, etc.) and seeing to it that the entire supply chain system is running smoothly.
SCM provides a clear understanding of the entire manufacturing process and also helps in planning and automating certain stages in the supply chain to produce and deliver the products faster and with efficiency to the right consumer. Development and maintenance of SCM involves high complexity and costs. Due to its complex nature, often many crucial functionalities are oversighted and companies face chances of errors in their results.
The main objective of supply chain management is to monitor and relate production, distribution, and shipment of products and services. This can be done by companies with a very good and tight hold over internal inventories, production, distribution, internal productions and sales.
In the above figure, we can see the flow of goods, services and information from the producer to the consumer. The picture depicts the movement of a product from the producer to the manufacturer, who forwards it to the distributor for shipment. The distributor in turn ships it to the wholesaler or retailer, who further distributes the products to various shops from where the customers can easily get the product.
Supply Chain Management – Advantages
- Develops better customer relationship and service.
- Creates better delivery mechanisms for products and services in demand with minimum delay.
- Improvises productivity and business functions.
- Minimizes warehouse and transportation costs.
- Minimizes direct and indirect costs.
- Assists in achieving shipping of right products to the right place at the right time.
- Enhances inventory management, supporting the successful execution of just-in-time stock models.
- Assists companies in adapting to the challenges of globalization, economic upheaval, expanding consumer expectations, and related differences.
- Assists companies in minimizing waste, driving out costs, and achieving efficiencies throughout the supply chain process.