Definition of Supply Chain Management
Supply Chain Management (SCM) is a multi-functional process which involves management of inter-linked business networks involved in the crucial purpose of delivering products and services required by the end users/customers. It is associated with the planning, designing, executing, monitoring and controlling the activities of supply chain with the main aim of creating value for the offered products and services.
The interactive network of suppliers, manufactures, logistic service providers involved in various functions like procurement and transformation of materials into intermediate and finished goods, followed by their distribution to customers is known as Supply Chain. Both manufacturing as well as service organisations have supply chain networks.
According to Cooper and Ellram___” Supply Chain Management is an integrative philosophy to manage the total flow of distribution channel from the supplier to the ultimate user”.
According to Christopher___” SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole”.
SCM is a systems approach which manages and controls the flow of goods, money, raw materials and information from factories and distribution centers to the end users. The term ‘Supply management’ is different from SCM, as it mainly focuses upon buyer supplier relationship; however, SCM has a broader scope.
Objectives of Supply Chain Management
- Service Orientation: To provide superior services to end users is one of the main objectives of SCM. The overall superior value that a customer receives can be referred to as service. However, this value largely depends upon the perception of customers.
- Systems Oriented: Systems orientation forms the core of supply chain. Due to co-operation and co-ordination among channel members, a synergy is created, which is the main advantage of supply chain.
- Competitiveness and Efficiency: An important aspect for healthy existence of a firm’s supply chain is competitiveness as it is essential for providing increasing value to the end users. Therefore, for attaining competitiveness, it is essential for companies to achieve high efficiency levels, as efficiency is the main component of competitiveness.
- To Minimize Time: The involved in conversion of orders into cash is significantly reduced through an efficient supply chain. This helps in reducing the overall time lag, which ultimately increases the organization’s productivity.
- To Minimise Work-in-Progress: SCM aims at minimising the overall Work-in-Progress involved in the supply chain.
- To Improve Visibility of Demand: With help of all its partners, SCM aims to improve the visibility of demand.
- To Improve Quality: Improving the quality of operations undertaken at various stages of supply chain is another objective of SCM.
- To Decrease Warehousing Cost: An efficient supply chain aims at reducing the amount of inventories held at warehouses. This significantly decreases the warehousing costs.
- To Improve Value: Value is the difference between the worth of final product to the consumers, and the effort made to provide the product. SCM aims to maximise and improve the overall value created by its products and services.
- Decrease Transportation Cost: One of the most important objective of SCM is to minimise the transpiration costs involved in the supply chain process. With this, SCM reduces the total carrying cost which evidently increases organization’s efficiency.
Features of Supply Chain Management
- Integrated Behaviour: SCM tries to bring about co-ordination between different stakeholders, i.e., from suppliers to customers.
- Mutually Sharing Information: An effective SCM involves mutual sharing of information among its channel members. Information is shared especially for the purpose of planning and monitoring.
- Mutually Sharing Channel Risks and Rewards: An effective SCM also involves sharing of channel risks and rewards, which evidently leads towards the achievement of competitive advantage. Such sharing should be on a long-term basis as it is significant for promoting co-operation among members involved in the supply chain.
- Focus on Serving Customers: Every member involved in an effective supply chain shares a common goal and objective of catering the needs of end users. For this purpose, policy integration is essential.
- Integration of Process: The SCM process can be implemented successfully only if, there is integration between the various processes of SCM, namely procurement, manufacturing and distribution of end products throughout the distribution channel. Such integration can be achieved through cross-functional teams, third party service providers, and supplier personnel present at the operational plants.
- Partners to Build and Maintain Long-term Relationships.