What is Supply Chain Management?
Supply chain management – SCM was a term invented by Keith Oliver, a consultant belonging to the firm Booz Allen Hamilton, in the year 1982, to describe the overall process of planning, implementing, and controlling what goes on at the supply chain in order to satisfy customers’ needs in a quick, efficient manner.
As carried out in practice, supply chain management can involve everything from overlooking the exchange and storage of raw materials, taking inventory of all work that is in process, as well as the movement of goods from their point of origin to the point where they will be consumed.
In other words, supply chain management is the process of overlooking and making the necessary arrangements for the sourcing, procurement, conversion, logistics and management of the supply chain. Those working in supply chain management must also collaborate and coordinate the movement of goods with channel partners. These might include anyone from customers to suppliers, from third party providers of specialized services to intermediaries in the supply chain. Essentially, the field of supply chain management overlooks all fields of supply and demand management within particular companies, while also working across different companies.
There is also a related field you should be aware of called supply chain event management, oftentimes abbreviated to SCEM. Supply chain event management takes in to consideration all the things that can go wrong in a supply chain. Supply chain event management professionals are able to take in to account potential problems and plan the solutions in advance, to make sure everything goes smoothly in the long run.
Supply chain management is in many ways an extension of the field known as logistics. Although some argue that the two fields are dissimilar, they are actually alike in quite a number of ways. There are also supply chain management software products available on the market.
Major Issues in Supply Chain Management
Those working in the field of supply chain management have to acquaint themselves with the following issues, which their SCM addresses.
The first is the issue of distribution. Supply chain management must keep account of the suppliers’ names and addresses, their facilities, centers of distributions, as well as their warehouses and customers. The entire distribution network configuration must be understood.
Once the distribution logistics are sorted out, there must be a planned strategy of distribution. There are many things to be decided when it comes to how this strategy will operate – whether it will be centralized, decentralized, whether shipping will be direct or not, etc.
Thirdly, supply chain management deals with the flow of information. Systems must be integrated in to the supply chain that will ensure important info is stored – this might include inventory data, transportation info, forecasts, or demand signals.
Finally, supply chain management deals with the management of inventory. Raw materials, finished goods, and work in process is all taken in to account in both quantitative and qualitative terms, and the location of the inventory is also taken in to account.
Supply Chain Management in Practice
If you want your business to be able to compete in the global economy, then you are going to have to depend on a reliable supply chain. One effective means of deliberating supply chain management is for each partner in the enterprise to focus on a few of the important strategic activities. This approach to supply chain management has enriched such companies as Hewlett Packard and Dell in the last few years. This “inter-organizational” approach has been established as a valid organizational form.
It is hard to tell what the ultimate benefits and drawbacks of different supply network structures will be to different firms. There is not much known about coordination trade offs that might exist among the different players in a supply chain. From the perspective of a system, complex network structures can be broken down in to individual component companies. Typically, businesses in a supply network will concentrate their efforts on the processes’ inputs and outputs, not paying much mind for the other team players’ internal management structures. Thus, the selection of internal management control structures has been known to have an impact on the firm’s performance locally.
In the new century, there have not been a lot of business changes that have had much impact on the way supply chain networks have developed. The two main changes have been in the increasing dependency of business partnerships and strategic alliances, which has come about as the result of globalization; and the rapid evolution of technology has had an impact on coordination within the supply chain network’s team members.