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What Supply Chain Management Really Means

        posted by , May 03, 2013

Manage your supply chain or it will manage you.

Supply chain management is key to efficiencies such as low costs, productivity and sustainability.

It's no small task to manage a complex global supply chain. Supply chains may span hundreds of companies and dozens of nations. This usually translates to plenty of logistical, political, information, cultural and language challenges.

What is Supply Chain Management?

Supply Chain Management (SCM) is the management of an extended network of businesses to provision goods and services.

Supply chain management spans procurement, operations management and logistics over a supply chain.

Definition: Supply Chain

A supply chain is a system of organizations, people, processes, information and resources that provisions a product or service.

Examples of Supply Chains

The classic example of a supply chain is an automobile manufacturing supply chain.

automotive supply chain

A car company manages a complex supply chain of raw materials, materials, parts, assembly, sales and service.

Other examples of supply chain include:

  • Retail Supply Chain
    weaving factory → apparel warehouse → network of retail locations

  • Grocery Supply Chain
    farm → processing & packaging → distribution center → grocery store

  • IT Service Supply Chain
    infrastructure → software → service → consulting

  • Newspaper Supply Chain
    forestry → paper manufacturing → distribution center → newspaper → recycling → paper manufacturing

Why is Supply Chain Management Important?

Small firms have little control over their supply chain. They must purchase things on the open market and hope they arrive in time.

As your firm grows you may find that you need to control your supply chain to stay competitive. If you're manufacturing a watch that has 100 parts, you can't afford to have one part arrive late.

Large firms may develop highly optimized supply chains that make it difficult for any small firm to compete. For example, a small retailer has little ability to negotiate price or make sure that products arrive just in time so that they don't sit on the shelves too long. As a result, large retailers have lower costs and can set more attractive prices.

Supply Chain Management vs Logistics

Logistics is one component of supply chain management that manages the flow of resources from source to use.

Supply Chain Management & Sustainability

Sustainability is a business strategy that prioritizes responsible business practices. This is typically controlled with a triple bottom line of people, profits and planet. .

Supply chain management is a critical tool to achieve sustainability goals.

The people bottom line seeks a fair deal for employees and communities in your extended supply chain. This can be controlled with procurement processes that require suppliers to show that they meet these requirements.

The planet bottom line seeks to reduce the environmental impact of operations to a target level (as low as net 0). For most firms, supply chains are the primary source of energy consumption and waste products. Supply chain management processes can be extended to measure, monitor and reduce these impacts.

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