Definition of supply chain management

While companies act as individual entities in areas such as financial reporting and management, they are also members of broader supply chains. 

Supply chains link members together in the quest to add value to raw materials in stages until products are finally ready to be sold to customers. There are lots of definitions of supply chain management (SCM), but this is one from the Council of SCM Professionals:

“SCM encompasses the planning and controlling of all processes involved in procurement, conversion, transportation and distribution across a supply chain. SCM includes coordination and collaboration between partners, which can be suppliers, intermediaries, third party service providers, and customers.  In essence, SCM integrates supply and demand management within and between companies in order to serve the needs of the end-customer”.

Example

The challenge of SCM is the sheer breadth of coordinating processes across supply chains from raw material to end-customers. 

Cisco Systems comments "increasing customer demands, competition, and rising development costs are changing the face of business. To stay competitive, companies must transform their supply chains from cost-based, back-office functions to flexible operations designed to effectively address today's challenges" (interview by Paul Taylor with Kevin O’Marah, chief strategy officer at Gartner).

While the role of purchasing has traditionally been limited to cost reduction, the opportunity today is for buyers, suppliers, and distributors to work more closely together.  The internet has opened up many opportunties to facilitate the sharing of information and a better focus on the end customer needs.  In other words, companies such as Cisco today see SCM as crucial to competing in tomorrow’s market places. [1]

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Importance of the supply chain

Supply chain is a strategic discipline

 


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