A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. This network forms a multitudinous system through which information and materials flow. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
SCM is the process of optimizing a company's internal practices, as well as the company's interaction with suppliers and customers, in order to bring products to market more efficiently (also referred to as supply chain integration or supply chain optimization). SCM functions include demand forecasting, sourcing and procurement, inventory and warehouse management, distribution logistics, and other disciplines. A company that performs these functions most effectively is in a position to deliver products more quickly, and at a lower cost or higher profit margin, than its competitors.
To manage the supply chain effectively, a company must try to eliminate delays and cut the amount of resources that are tied up along the way. Most often this is achieved by reducing inventory costs by asking suppliers to maintain a JIT-type IT system to keep inventory levels low and arriving only when needed. This involves a successful relationship with suppliers in the supply chain to ensure this type of system is achievable.
Supply chain management can reduce costs, improve service, and enhance revenues simultaneously!
SCM is a process-oriented, integrated approach to procuring, producing, and delivering products and services to customers…it has a broad scope that includes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users… SCM covers the management of material, information, and funds flows.
SCM uses advanced technology, information management, and operations research math to plan and control an expanding complexity of factors to better produce and deliver products and services in a customer-pleasing way.
SCM is difficult and this is primarily due to the elements that keep the area constantly evolving. Changes in technology developments, world economics, and marketplace shifts mean that the supply chain must be flexible to the changing conditions, know the needs and desires of the end customer, and communicate throughout the total supply chain. Individual groups must come together with a combined focus on the performance of the SC, often at the expense of their own individual performance.
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