Supply chain management (SCM) is the combination of the process and information technology 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.
Supply Chain Collaboration
Successful implementation of a supply chain management system improves the efficiency of collaboration between suppliers, manufacturers
and distributors - the collaboration of material flows, information flows and financial flows.
Collaboration of Material Flows The move of raw materials and components in the supply chain is a two-way street. It involves the move of
physical product flowing from suppliers, manufacturers, distributors to customers through the supply chain, and the move of products from consumers
to distributors, and manufacturers as a result of product returns, recycling or disposal.
Collaboration of Information Flows The smooth flow of information within a supply chain facilitates supply chain planning which involves
demand forecasting, inventory simulation, manufacturing planning, and transportation scheduling.
Collaboration of Financial Flows Along with the move of physical product and order transmission, supply chain collaboration involves the
settlement of financial transactions - credit card information, purchase order, payment schedules and title ownership arrangements.
Collaboration of Workforce Flows The new breed of Supply Chain Management tools help the collaboration of workforce across
the entire supply chain. For instance, vendors such as RedPrairie Corp. and Manhattan Associates Inc. are focusing on workforce management in
manufacturing processes. Software applications are designed to maximally utilize the skills of employees across the supply chain.
The Supply Chain System of Wal-Mart and Procter & Gamble
SCM is 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 of supply chain collaboration. It is generally performed only by large
corporations with large suppliers.
Much of the popularity of supply chain management in business community is attributed to the success of Walmart's supply chain system - an example
of collaboration between a large supplier/manufacturer (Procter & Gamble) and distributor/retailer (Walmart). Before these two companies started
In 1980s, the two giants built a software system that linked P&G up to Wal-Mart's distribution centers. At Walmart's distribution center, when
the inventory level of P&G's products reaches re-order point, the system automatically alert P&G to ship more products. In some cases,
the collaboration between P&G and Calmat goes all the way to the individual Wal-Mart store. P&G was able to pass the saving from inventory
management and order processing to Walmart and eventually to Walmart's consumers at "low, everyday prices".
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