supply chain management definition

A supply chain, logistics network, or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. Its management deals with the process of planning, implementing, and controlling its operations with the purpose of satisfying customer requirements as efficiently as possible.

Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. It integrates supply and demand management within and across companies

If a supply chain management system is properly implemented, strategic and competitive areas can be used to their full advantage. Fulfillment is enabled through efficient communication, ensuring that orders are placed with the appropriate amount of time available to be filled. The supply chain management system also allows a company to constantly see what is on stock and making sure that the right quantities are ordered to replace stock.

Logistics is enhanced, keeping the cost of transporting materials as low as possible consistent with safe and reliable delivery. Production can run smoothly as a result of fulfillment and logistics being implemented correctly without delays due to ordering and transportation. The company's flexibility to respond to unforeseen changes in demand and supply is improved.

Because of this, a company has the ability to produce goods at lower prices and distribute them to consumers quicker than companies without supply chain management thus increasing the overall profit. And most especially, cooperation among supply chain partners and consumers is established ensuring mutual success.

Supply chain management must address the problems regarding distribution network configuration—number and location of suppliers, production facilities, distribution centers, warehouses and customers; distribution strategy—centralized versus decentralized, direct shipment, cross docking, pull or push strategies, third party logistics; information—integration of systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation; and inventory management—quantity and location of inventory including raw materials, work-in-process and finished goods.

Supply chain management is a cross-functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end-consumer. Its success relies on the corporations' focus on core competencies and being flexible. In some circumstances, operations should be outsourced to other corporations that can perform the activities better or more cost effectively.

In effect, the number of companies involved in satisfying consumer demand would increase, while reducing management control of daily logistics operations. Less control and more supply chain partners would lead to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity.