Supply Chain Management

What Is Supply Chain Management (SCM) and Why Is It Important?

• Supply chain management (SCM) is collection of activities which is required to plan, monitor and execute the flow of a product from materials to production to distribution in the most economical way possible.
• SCM includes the integrated planning and execution of processes needed to automate the flow of goods, information and resources into roles that broadly include demand forecasting, procurement, development, inventory management, storage and transport.
• In these endeavors companies use business strategy as well as specialized software to create a competitive advantage.
• Supply Chain Management is a vast and dynamic activity that depends on every partner–from suppliers to manufacturers and beyond–to function well. 
• Because of this, effective supply chain management also requires change management, collaboration and risk management to create alignment and communication between all the participants.
• We can understand the process of SCM with the following diagram.

Benefits of supply chain management

1. Higher Efficiency Rate.
2. Decrease Cost Effects.
3. Increases Output.
4. Increases Your Business Profit Level.
5. Boost Cooperation Level.
6. No More Delays In Processes.
7. Enhanced Supply Chain Network.

More about benefits of Supply Chain Management

• Management of the supply chain produces benefits such as new efficiencies, higher profits, lower costs and greater collaboration.
• SCM allows companies to manage demand better, carry the right amount of inventory, deal with disruptions(अवरोध ), minimize costs and meet customer demand in the most efficient way possible.
• Such SCM advantages are accomplished by choosing effective strategies and suitable tools to handle the increasing complexity of the supply chains today.

Importance of supply chain management

• SCM has significant effects for both the business and the consumer.
• Management of the supply chain operations will enhance customer service. Because they have the ability to ensure customer satisfaction by making certain products available at the right time, at the right location.
• Enterprises are able to build and enhance customer loyalty by increasing customer satisfaction rates.
• SCM also provides businesses with a major advantage by reducing operating costs.
• SCM activities can reduce purchasing, manufacturing costs and the total supply chain. 
• Lowering costs improves a company's financial position by increasing profit and cash flow. 
• The critical role of SCM in society may be less understood and undervalued. 
• SCM will help to ensure human survival by improving nutrition, protecting people from harsh climatic conditions and sustaining life.
• People rely on supply chains to deliver necessities like food and water as well as medicines and healthcare. 
• The supply chain is also critical to supplying power to homes and businesses, providing the energy needed for lighting, heating, air conditioning and cooling.
• SCM can also improve the quality of life by promoting job creation, creating a base for economic growth and raising living standards.
• It offers a multitude of job opportunities as supply chain professionals design and control all of a society's supply chains as well as manage inventory control, warehousing, packaging and logistics.

Supply chain management processes

• Each major phase of the movement of a product through the supply chain from materials to production and distribution has separate business processes and disciplines of its own. 

• The SCM process begins with finding out what goods consumers want, the early stages of supply chain preparation, traditionally considered one of SCM's two main divisions, along with supply chain execution.
• Supply chain planning begins with demand forecasting, a method for collecting historical data, such as past sales, and applying analytics and predictive analysis to create a forecast or demand plan that can be decided upon by the sales department and operating departments such as production and marketing.
• In the next major step, production planning, the company nails down the specifics of where and how the products called for in the demand plan will be manufactured.
• Production planning is also used in other industries, such as agriculture and oil and gas.
• Material requirements planning (MRP) is a process to ensure sufficient materials and components are available for use in the manufacturing process by taking inventory of what's on hand, identifying gaps and buying or making the remaining items. 
• In most of SCM's major steps two complex processes play important roles: inventory management and logistics. 
• Inventory management consists of various techniques and formulas to ensure adequate supply of raw materials in a manufacturing plant, possibly managed in an MRP system, to packaged goods in a retail store for minimal time and resource expenditure.
• Logistics is all about transporting and storing goods from the beginning of the supply chain, delivering parts and materials to manufacturers, delivering finished goods to stores or directly to consumers, and even beyond the process of servicing, returning and recycling products, known as reverse logistics. Control of inventories is chained throughout the logistics cycle.
• Procurement, also referred to as procurement, is the process of finding vendors for goods, handling such relationships and economically purchasing the products along with all correspondence, such as sending out bid requests and documents, including purchase orders, invoices, etc.
• It is a major component of supply chain management, given how much is bought and sold at all points along the chain. 
• Strategic procurement is an elevated and more advanced form of procurement that seeks to automate the procurement process for an organization by taking advantage of its centralized purchasing power and aligning it with overall business objectives.

The role of SCM software

• Technology is critical to managing today's supply chains and there is an apps category dedicated to every major supply chain management process. 
• Many providers of ERP packages provide software for the supply chain management and there are thousands of niche vendors.

• Technology is crucial for the management of today's supply chains and there is a category of apps dedicated to every major supply chain operation. Several ERP product suppliers offer supply chain management tools and there are thousands of small vendors out there.