What is supply chain management (SCM)?

23.05.22
Management
What is supply chain management

At a basic level, supply chain management (SCM) is the management of the flow of goods, data, and funds associated with products or services from the purchase of raw materials to the delivery of the product to its final destination.

History of SCM systems

Supply chains have existed since ancient times, starting with the first product manufactured and sold. With the advent of industrialization, supply chain management became more complex and allowed companies to produce and deliver goods and services more efficiently. For example, the standardization of auto parts introduced by Henry Ford proved to be a breakthrough that allowed the mass production of goods to meet the demands of a growing number of customers.

Over time, subsequent developments (such as the introduction of computers) steadily increased the level of sophistication of SCM systems. However, these systems remained for many years essentially a linear, stand-alone function managed by supply chain professionals.

Globalization

We live in an era of unprecedented globalization, constant technological advancements and rapidly changing customer expectations. The best supply chain management strategies today require the implementation of a demand-driven operating model that can successfully combine people, processes, and technology to deliver goods and services with exceptional speed and accuracy.

Adapting your style

Supply chain management has always been the foundation of the enterprise, but today it is a more important function than ever that determines success in business. Indeed, the companies that can effectively manage the supply chain to adapt to a changing, technology-dependent business environment will win.

Today’s SCM systems are completely oriented towards the customer

The goal of supply chain management has always been to increase efficiency and reduce costs. These goals have not changed, but today the customer plays a major role in prioritizing such management. It has been said that “customer experience lives and dies in the supply chain”.

Customer loyalty depends on a company’s ability to meet their expectations quickly and accurately. Raw material supply, manufacturing, logistics, sales, and order management must be coordinated so that the customer gets what they want within a reasonable timeframe.

To do this, a company must analyze its supply chains from the customers’ perspective. This is because it is not only about on-time delivery, but also about performing all necessary activities in a timely manner, both before, during and after such delivery.

The future of SCM systems

The most important aspects of the supply chain of the future will be responsiveness and customer service levels – factors that will be analyzed and managed within a network model rather than a linear model. Each point in the network will need to be both flexible to customer needs and capable of handling areas such as sourcing, trade policy, shipping methods, etc.

Advanced technology will increasingly be used both to improve transparency and visibility across the network and to support further connectivity and use of SCM functions. The entire SCM planning function will become smarter to accommodate consumer demands. Adaptability will be mandatory.

In the past, supply chain planning was a periodic business venture. In the future, it will be continuous by nature. SCM systems will also provide tighter integration of planning and execution functions, which is not standard in most enterprises today. The need for speed and accuracy in the context of supply chain management will increase.

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