Supply Chain Management (SCM) - Components of SCM

In the simplest terms, supply chain management (SCM) lets an organization get the right goods and services to the place they’re needed at the right time, in the proper quantity and at an acceptable cost. Efficiently managing the SCM process involves: 

  • overseeing relationships with suppliers and customers 
  • controlling inventory 
  • forecasting demand and getting constant feedback on what’s happening at every link in the chain.

Elements of SCM: 

Inventory: Each link in the supply chain has to keep a certain inventory of raw materials, parts, subassemblies and other goods on hand as a buffer against uncertainties and unpredictability. Shutting down an assembly plant because an expected parts shipment didn’t arrive is expensive. 

Transportation: How do materials, parts and products get from one link in the supply chain to the next? Choosing the best way to transport goods often involves trading off the shipping cost against the indirect cost of inventory

Components of SCM: 

Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. 

The following are five basic components of SCM: 

Plan: This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. 

Source: Next, companies must choose suppliers to deliver the goods and services they need to create their product. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers to improve the relationship. 

Make: This is the manufacturing step. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chainone where companies are able to measure quality levels, production output and worker productivity. 

Deliver: This is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. 

Return: This can be a problematic part of the supply chain for many companies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers who had problems. 

Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer. 

Supply Chain Management (SCM)


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