Supply chain management (SCM) is the broad range of activities required to plan, control and execute a product’s flow, from acquiring raw materials and production through distribution to the final customer, in the most streamlined and cost-effective way possible.
SCM encompasses the integrated planning and execution of processes required to optimize the flow of materials, information and financial capital in the areas that broadly include demand planning, sourcing, production, inventory management and storage, transportation — or logistics — and return for excess or defective products. Both business strategy and specialized software are used in these endeavors to create a competitive advantage.
Supply chain management is an expansive, complex undertaking that relies on each partner — from suppliers to manufacturers and beyond — to run well. Because of this, effective supply chain management also requires change management, collaboration and risk management to create alignment and communication between all the entities.
Logistics vs. supply chain management
The terms supply chain management and logistics are often confused or used synonymously. However, logistics is a component of supply chain management. It focuses on moving a product or material in the most efficient way so it arrives at the right place at the right time. It manages activities such as packaging, transportation, distribution, warehousing and delivery.
In contrast, SCM involves a more expansive range of activities, such as strategic sourcing of raw materials, procuring the best prices on goods and materials, and coordinating supply chain visibility efforts across the supply chain network of partners, to name just a few.
Benefits of supply chain management
Supply chain management creates efficiencies, raises profits, lowers costs, boosts collaboration and more. SCM enables companies to better manage demand, carry the right amount of inventory, deal with disruptions, keep costs to a minimum and meet customer demand in the most effective way possible. These SCM benefits are achieved through the appropriate strategies and software to help manage the growing complexity of today’s supply chains