What is Supply Chain Management?
Supply chain management is the combination of the enterprise strategies, business process and information technologies that integrates
the suppliers of raw materials or components, the manufacturers or assemblers of the finished products, and distributors of the products
or services into one cohesive process to include demand forecasting, materials requisition, order processing, order fulfillment, transportation
services, receiving, invoicing, and payment processing.
While ERP and CRM systems are intended to re-engineer internal business processes to archieve better resource planning and coordination across
departments, SCM systems are utilized to facilitate the coordination with outside business entities, or in the scope of extended enterprise.
SCM usually refers to the redesign of supply chain processes in order to achieve streamlining. It is generally performed only by large corporations
with large suppliers. B2B exchange can extend Supply Chain Management to all trading partners regardless of size by providing a central location to
integrate information from all supply chain participants.
Participants in a Supply Chain
- Suppliers - They are organizations that provide goods and/or services to a purchasing organization (a manufacturer or a distributor).
It is often used synonymously with vendors but may also refer to an internal company resource.
- Manufacturers - They are the companies engaged in the original production and assembly of products, equipment or services. They sometime refer to
companies that purchase such products or services manufactured or assembled in accordance with company specifications.
- Distributors - Those are the external entities that sell for suppliers or manufacturers directly and often collects all payments from customers and
maintains an inventory of the supplier's or manufacturer's products.
Processes of Supply Chain Management
- Demand Planning and Forecasting - Accurate demand forecasting is considered one of critical success factors in supply chain management.
Supply chain software systems often utilize sophisticated mathematical models for predicating future demand from historical data. The accuracy of
the demand forecasting is largely dependent on how abnormal data is treated in the demand forecasting. Demand forecasting is an ongoing process.
Supply chain management systems can generate alerts at the frequencies of user preference, whether it's on a weekly, or monthly basis.
- Procurement - This is the process of choosing the suppliers that will deliver the goods and services you need to manufacture or assembly
your products or to create your services. It involves price negotiation, receiving, and verifying the shipments. Supply chain management systems
can be integrated with industry-specific B2B exchanges to automate the procurement processes.
- Manufacturing and Assembly - Raw components are assembled into final products or raw materials are manufactured into finished goods.
Manufacturing involves the activities of production, testing, packaging and preparation for delivery.
- Distribution - Products or services are delivered to consumers. Distribution involves warehousing, delivering,
invoicing and payment collection.
- Return - Return and refund are important parts and also the problem parts of supply chain management. Supply chain management systems should
have infrastructure in place for receiving defective and excess products back from customers.
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Related Topics
Supply Chain Management Definition - A Systems Perspective
Supply Chain News Portal
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