What is Supply Chain Management?

supply chain management

Supply chain management, or SCM, is a term that is commonly used in the business world, but what does it mean?  IoT seems to be revolutionizing SCM . Additional advancements make it easier than ever to implement it. So it’s important to understand what this is and what it means for businesses. Here are a few of the things a person should know about SCM.

The Definition

The term basically means the management of the supply chain.  This includes the raw materials, final products, and critical information that is shared among:

  • suppliers
  • companies
  • customers

It is a logistical coordination of physical goods between vendors and companies. It also refers to the final goods hitting the open market. Consumers rarely think about SCM. However, it is one of the most important aspects of any business or company that manufactures, sells, or distributes physical goods.

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The origin of the term SCM can be traced back to a 1982 Keith Oliver interview that was conducted by the Financial Times. A decade later, the term gained momentum in the business and commerce sectors. This was accomplished when books and articles on the subject permeated the market. Since then, the term has gone mainstream, with many universities and colleges offering programs based on supply chain management. This is because there are now supply chain managers at the biggest companies in the country. The term has remained the same for the past 35 years. But the way SCM is conducted has changed drastically with the evolution of the internet and digital partnerships. Now, it is a word that is as commonplace in business terminology as marketing or Big Data.

SCM Functions

SCM has a primary function of managing the various vendors that supply raw materials to a single company or a network of companies that produce the same product. As organizations have grown to global proportions, they have systematically reduced their ownership of raw materials, increasing the need for trade agreements with companies that supply what they need. SCM ensures that demand is always met for the supply. It also ensures that the agreements are always honored.

Another function is to build a relationship of trust between companies and vendors. This is incredibly important as it ensures that trade agreements are created with fair terms. This is done by supply chain managers building in-person relationships with their counterparts at the different vendors their company uses.

Importance In Business

SCM has been an important component of how businesses operate even before the term was coined. Now that the business world is more globalized and networked, with several countries adding to one network for a particular business. The evolution of SCM is a priority for most countries. The addition of digital technologies has changed SCM in that communication is now far easier, allowing networks to grow and divide into specialties. This is important for web-based companies. SCM also has importance for organizational learning, especially for companies that have expansive supply chain networks. Advancements can lead to more effective and productive networks.

SCM is a buzzword that few people truly understand, and that’s because it’s importance in the business world is changing. It is still an aspect that requires a student’s attention, especially as the business world transitions to new and more technologically advanced ways of managing their supply chain. This short primer supply chain management will be of help to anyone who needs to understand SCM. However, as with most business buzzwords, there is always more to learn about the subject, so start researching.

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