What is Supply Chain Management?

by Devra Gartenstein - Updated March 06, 2018
Revision of goods

Supply chain management (SCM) is the process of shepherding materials through the many phases of a company's operations, from procurement and warehousing to shipping. Effective SCM ensures that items go where they need to go, when they need to go there. These efficiencies save your business money by avoiding confusion and redundancies, and they create a superior customer experience since orders are filled with high-quality products.

Elements of Supply Chain Management

SCM forecasts demand for a product, placing orders in advance so materials are available on-site when they are needed. Purchasing is an important part of the process, as supply-chain managers decide where to get necessary items at the best price in a time frame that synchronizes with company operations. Product assembly and storage are part of the supply chain process as well, as materials are manufactured into products and then stored until these products are ordered. Keeping track of inventory affects multiple parts of the supply chain process. Having insufficient inventory means it is time to order more materials, and more items must be produced. On the other hand, having excess inventory calls for increased marketing efforts or clearance strategies. Once customers place orders, supply-chain managers make sure these orders are accurately filled and produced on time, and then the supply-chain process is set in motion again to replace materials that have left the shop.

Benefits of Supply Chain Management

Effective SCM creates a smooth flow of work and materials, saving money and increasing customer satisfaction. When materials are available when needed to fill orders, you avoid idle time waiting for parts. You also sidestep the bottlenecks that occur when a phase of the production process is complete before another phase is ready to begin. When materials are on hand or arrive quickly enough to complete orders on schedule, customers are satisfied, and you earn their repeat business. A supply-chain manager who manages inventory well avoids the waste that occurs if you have too much of an item on hand when demand plummets. Successful inventory management also helps with cash flow because your capital is fluid and available for pressing expenditures such as rent and payroll rather than tied up in materials sitting on your shelf collecting dust.

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Flexible Supply Chain Management

Supply-chain managers work with variables that are constantly shifting, and successful operations depend on being able to adapt and shift gears as needed. Sourcing difficulties can be avoided by having multiple options for obtaining different items. Processes should be fluid enough that they can be reconfigured if demand changes. For effective SCM, develop strategies and plans, and then create a backup plan, and another, just in case.

About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.

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