What is Supply Chain Management?

The concept and practice of supply chain management (SCM) is relatively new to the business world, and as such it is not universally recognized or understood by individuals not close to it despite all the advertising from FedEx and UPS. This section will provide a short primer on SCM.

First, a definition from the Council of Supply Chain Management Professionals (CSCMP):

Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.

Another view of supply chain management is provided by the Supply Chain Council in its SCOR model, which features the interlinked, high-level processes of PLAN, SOURCE, MAKE, DELIVER, and RETURN.

There are also a few excellent principles which define SCM. Many firms have come to appreciate that there are considerable benefits to be derived from organizing and managing their manufacturing or service business in a horizontal flow, as opposed to vertical departmental silos, while simultaneously practicing collaborative processes both internally and externally. Related to this is the practice of managing the business as a “system” and thus avoiding sub-optimal department-to-department decision making.

Finally, another useful way of describing SCM is by looking at the various activities involved, which would include the following:

  • Strategic planning, forecasting, sales and operations planning
  • Buying, purchasing, procurement, supplier relationship management
  • Manufacturing, production planning, packaging, plant maintenance
  • Logistics, transportation, warehousing, outsourcing, customer service