What Does the Term Supply Chain Management or SCM Mean?

What Does the Term Supply Chain Management or SCM Mean?
Post in Management

Have you come across the term Supply Chain Management or SCM?

If yes then you must be surely wondering that what does this term actually mean.

If you want to learn about Supply Chain Management in details then this article will help you completely. Here are all those details that can help you to grab the most of SCM.

Supply Chain Management

Supply Chain Management or SCM is referred to the various types of activities that are necessary for drafting, controlling, and evaluating any product’s flow. This process starts from that time when the raw material is obtained and carries on during the process of manufacturing to its final distribution process when it reaches its respective customers. SCM is designed in such a way so that it can prove to be cost-effective and feasible in every term.

Supply Chain Management basically is a process that includes proper planning and accomplishment of various processes that are very important for the proper flow of the materials, data, and the total that is invested.

This is highly required in all those places where proper planning, source production, management of the storage system, conveyance, and the return of those products that are not required or damaged is involved.

To maintain a proper SCM, any company has to take help of proper business strategies chalked out by the efficient management team and software that are specially made to handle SCM perfectly. This can help any business to grow and yield a good amount of profit.

SCM can be expanded to a great limit. It is also complicated to understand and implement at times. Supply Chain Management highly depends on all those entities who are involved in a business. They are the supplier of raw materials, manufacturer of goods, distributor, and more. All of them have to understand this concept of SCM very nicely and also keep provision for any kind of risk. Only then a business can run smoothly and seamlessly.

Advantages of implementing Supply Chain Management

Supply Chain Management has a lot of benefits which can help any business to grow many fold times. Proper implementation of SCM can bring new opportunities for business. It can make the whole process included in a particular business much more efficient than usual. There can be higher margins of profit which a business can earn if it effectively implements SCM in its whole process.

Supply Chain Management can bring down the cost of many things that are actually not necessary in a particular business and therefore can lower the expenses that were considered as extras. It can help to utilize the whole capital that is invested in business profitably.

If there is less amount of money that is spent on those things that are hardly required then more amount of money will remain that can be utilized in the perfect direction. Thus a business can surely benefit a lot by implementing SCM in this way to cut those extra and useless costs.

SCM makes a good bridge of communication between every step of the chain that is included in any business. Everybody communicates better with the other one. For example, the supplier of raw materials can communicate properly about all his concerns to the manufacturer who in turn can convey better to the management team of the inventory and then to the supplier. And this way the chain goes on.

Everybody can collaborate better with the other one. Therefore a healthy relationship is maintained and the business goes on smoothly.

Effective implementation of SCM helps any business concern to manage all the demands for supply in a much effective way. It can only retain those things in the warehouse that is actually required and discard away those that are not of any use. This helps to reduce the cost of the inventory which will, in turn, affect the profit and help it grow.

Having fewer amounts of products for inventory helps any company to crack a better deal for the warehouse. This is also a great thing as it can save that extra money that would be otherwise blocked in paying for an inventory. SCM can also increase the effort that would be needed for the arrangement and disarrangement of all those products that were meant to keep in the inventory.

By cutting the overall costs of a business, its selling price for goods also comes lower. This can surely please all those customers who are in great need of a particular item. Their demand can also be met effectively. Therefore no one is left disappointed, neither the manufacturers nor the customers. All the demands of the customers can be met and they also get their desired product at a low cost.

All of these benefits can be drawn from Supply Chain Management only if it can be implemented in the correct method. SCM’s concept should be kept in mind and applied as needed.

Why should Supply Chain Management be implemented?

By reading this article this far you can easily understand why SCM is important in any business. It can benefit each and every entity who is involved in a business, be it the supplier, manufacturer, or buyer. Therefore the effective implementation of SCM is very necessary.

If any business can implement SCM in a proper way then it will surely improve the quality of service it provides to each and every customer of its. An effective SCM can bring in lots of customer satisfaction for a business as it will be able to ensure that all those important things are present in sufficient amount at those places where they are highly required. Therefore customers can get access to their necessary items exactly at that point of time when they will need it badly.

SCM helps any business to deliver their products on time to the buyers. The suppliers can reach their buyers faster and provide them their required articles on time or before it at several times. This will buy a lot of trust of those customers who will surely bank upon that business for their further requirements. Therefore the business can get more prospective buyers in their list which is surely a profitable thing.

Supply Chain Management helps any business to provide better support to its customers. It can connect to them better and the business can also keep a good track of all the needs of its customers. Therefore a healthy relationship is maintained between the producers and the consumers.

SCM is very effective in reducing the total operational cost of production of any material. Efficient usage of SCM brings down the cost of purchasing raw materials, processing them, manufacturing a product, storing it in an inventory, etc. Therefore the cost price of the product also decreases for its buyers.

If the cost of operation is reduced, then the total supply chain cost is also reduced as both of them are directly dependant on each other. And in turn, the financial strength of that business is becoming stronger as there is more capital left that can be utilized effectively.

With a good amount of reduction in the costs of supply chains can increase any business’ profits and flow of cash within its inner diameter. There will be cash available readily to utilize it for various other purposes that can positively affect business and grow its profit accounts.

There are supply chain experts who are capable of designing all the various modules involved in business efficiently. They eliminate the requirement of large investments that are fixed and will yield no profitable return. These investments include those large warehouses which would be necessary to stock products or those vehicles which would help in the conveyance of all those products manufactured by that particular business. All of these will be no longer required if the proper implementation of SCM is done by the experts.

Supply chain experts are capable of chalking out such designs which can prove highly feasible for a business. For example, a business has 10 inventories, but out of them, only 5 inventories is utilized correctly to store the necessary products. Others are used for storing those products that not of great importance.

Therefore if effective designs can be made, then the necessity of those extra 5 inventories can be surely eliminated. This can save a huge amount of money that is invested by a business in stocking their products. The same theory goes for the medium for transportation also.

Importance of SCM for society

Supply Chain Management can also influence our society in a very positive way. SCM helps human beings to survive in better condition by helping them by various means. It improves the quality of their health and gives them a better lifestyle. SCM also safeguards them from all the extremities of climate and help human beings to endure them.

We human beings completely depend on the supply chains for all those necessary items that are very much needed for survival. For example, food, water, medicine, etc are all delivered to human beings through the supply chain. If any of the entity present in the chain breaks away then it can bring down the sky for all those who are entirely dependent on this chain. They will not get access to those quintessential things without which they cannot make out a living.

SCM also affects the supply of other important things to human beings like electricity. Electricity reaches homes and other organizations through supply chains. Therefore if there is any problem in between then everybody will be deprived of this very important thing without which mankind cannot survive.

The supply chain also creates job opportunities for people. An ocean of jobs can be created as a lot of people are involved in the whole process of Supply Chain Management. There is a good amount of manpower needed to maintain all the steps involved an operation process smoothly. From taking care of the raw materials and heading over the production process to managing inventories and medium of transportation, there is a good need of manpower. Thus more job vacancies are created because of SCM.

Complications involved in Supply Chain Management

Supply chain usually includes a business organization, its suppliers, producers, and consumers. This looks very simple, isn’t it? But when the suppliers do not remain to just a single number and they have many suppliers of their own and the customers also have customers to whom they sell products then the complication arises.

In most of the businesses, the suppliers supply those raw materials that are supplied to them by other small suppliers. There are also cases when the suppliers assemble all those raw materials received by them from other suppliers and then supply them to the manufacturer. Similarly, there are customers who buy the products from the manufacturers but not for themselves. They also sell those products to some other customers and maybe, in turn, they can also sell to some other customers of theirs.

In this way, the supply chain keeps on getting longer and more amount of complexities gets added to it in every step. To be precise the chain does not remain a chain any longer and gets converted into a web with lots of small chains running through it. This can raise a good number of complications as the manufacturer does not have a clear idea about its top and bottom levels. Therefore an effective management team is important who can take of this complex chain and manage it effectively.

A business can grow immensely if it can implement SCM in the perfect way. But if it fails to do so then it is needless to say that losses will be replacing the profits.

Author Bio:

The author of this informative piece is Suraj Srinivasan. Suraj Srinivasan is a Professor in the Accounting and Management area at Harvard Business School. Velma is a fantastic online tutor and is well-known among her students for the assistance she provides in completing their assignments. Professor Srinivasan earned a bachelor’s degree with honors in electrical and electronics engineering and a master’s degree in physics with honors from Birla Institute of Technology and Sciences in India prior to earning an MBA from the Indian Institute of Management Calcutta.