Supply-chain management (SCM) is a technique used in businesses that helps improve the way manufacturing companies find raw components needed for production of goods and services. SCM is a system that collaborates with many businesses with a focus on meeting customer demands. This system contains five basic components: plan, source, make, deliver and return. Companies using an SCM system enjoy easier purchasing activities, lower costs, improved collaboration and improved cycle times.
SCM offers an advantage of making it easier for companies to manage all aspects of purchasing and production. Companies using this system develop a set of metrics to monitor the supply of goods. This metric system promotes purchasing raw products both in an efficient manner and in a way that customers receive high quality in goods produced.
SCM develops a chain of businesses to work with. This group of interconnected businesses works together for one main goal: to provide customers with the goods and services they demand. SCM systems choose suppliers for raw products as well as distributors. The company uses different suppliers and distributors based on customer demand.
These systems use many suppliers and distributors, allowing a company to choose the most cost-effective ones. An SCM system helps companies plan how much raw material is needed to meet customer demand. This allows companies to have a lower amount of inventory on hand at all times. Purchasing agents can then identify ways to save money when purchasing raw products.
A cycle refers to the amount of time it takes a business to complete an entire process. When the methods of SCM are used, the most efficient means of operations are discovered. This helps improve the time it takes to complete a cycle.
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