Supply Chain Management (SCM)

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Supply Chain Management, or simply "SCM", is the management of the two-way flow of materials, equipment, finances, information, and manpower resources within and among organizations to ensure the efficient and fast delivery of goods and services to the end customer. It involves the oversight of synchronized movement of these logistics from the supplier to the manufacturer, wholesaler, and retailer, until the end-product reaches the consumer.

Michael Dell didn't build his multi-billion empire simply by selling computers to consumers. He solved the complex problems of just-in-time manufacturing, inventory reduction, and efficient manufacture and delivery of goods to outdo his competitors. In short, he came out on top because he was a master of supply chain management.

Supply chain management was never a strategic issue in the past, when sourcing and delivery of logistics took a backseat to manufacturing. The emergence of new information technologies, however, changed the business landscape. Now organizations have the necessary tools to do business at a much faster rate. Companies that do not move their goods and information around quickly enough do not survive because they simply don't get their new products to the marketplace before their competitors do.

A basic supply chain management system has five (5) components: 1) the plan, which refers to the over-all strategy of the SCM program including the development of SCM metrics to monitor; 2) the source, which refers to the suppliers who'll provide you with goods and services necessary for you to run your business; 3) the 'make' or manufacturing component, which refers to the execution of processes needed to produce, test, and package your products or services; 4) the delivery, which refers to the system for receiving orders from customers, developing a network of warehouses; getting the products to the customers; invoicing customers and receiving payment from them; and 5) the return, which is the system for processing customer returns and/or supporting customers with problems with the products they received.

The choice of the right software in setting up an effective SCM system is crucial. There are two major classes of SCM software, i.e., supply chain planning (SCP) software and supply chain execution (SCE) software. SCP software is used to determine the best or most logical way to fill customer orders, while SCE software is used to track the physical location or status of goods and materials, and manage their flows effectively. The SCM software package selected must include both the aspects of planning and execution.

See Also: Knowledge Management; CRM; TQM; Kaizen

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