Supply chain management (SCM) is the optimization of a product's creation and flow from raw material sourcing to production, logistics and delivery to the final customer.
SCM encompasses the integrated planning and execution of processes required to manage the movement of materials, information and financial capital in activities that broadly include demand planning, sourcing, production, inventory management and storage, transportation -- or logistics -- and returning excess or defective products. Supply chain management relies on business strategy, specialized software and collaboration to work.
Because it's such an expansive, complex undertaking, each partner -- from suppliers to manufacturers and beyond -- must communicate and work together to create efficiencies, manage risk and adapt quickly to change.
In addition, supply chain sustainability -- which covers environmental, social and legal issues, in addition to sustainable procurement -- and the closely related concept of corporate social responsibility -- which evaluates a company's effect on the environment and social well-being -- are areas of major concern for today's companies.
Benefits of supply chain management
Supply chain management creates a number of benefits that translate to higher profits, better brand image and greater competitive advantage. These include the following:
- Better ability to predict and meet customer demand
- Better supply chain visibility, risk management and predictive capabilities
- Fewer process inefficiencies and less product waste
- Improvements in quality
- Increased sustainability, both from a societal and an environmental standpoint
- Lower overhead
- Improvements in cash flow
- More efficient logistics.