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Jun 17

What is Supply Chain Management (SCM)?

supply chainWould you like to understand the concept of supply chain management but don’t have the time to do so?

The good news is that in some upcoming posts we will explain to you the key principles and terms of supply chain management (SCM) that you can read and learn in under 3 minutes!

In this post we will focus on introducing the term ‘supply chain management’ and how your organization may improve the competitiveness of your supply chain.

The term “supply chain management” arose in the late 1980’s and came into widespread use throughout the 1990’s. Prior to this, businesses used terms such as ‘logistics’ and/or ‘operations management’. In the late nineties individual authors undertook an attempt to express the essence of supply chain management in one definition. Its constituents are the subject of a management philosophy, target group, goals and numerous ways to achieve these goals.

The subject of supply chain management is, of course, a chain that represents a network of all the organizations that are involved, through links up and down the chain of different processes and activities creating value in the form of products and services for the end customer.

In broad terms the supply chain consists of two or more separate organizations legally connected with one another by the flow of materials, information and finance. These organizations may be companies that produce parts, components and finished products, logistics providers and even the final customer. Network connections do not usually focus on the flow inside a single chain, but consists of complex flows associated with a variety of customer orders, which must be operated in parallel.

In the narrower sense of the term supply chain, it is used for large companies with multiple locations, often located in different countries. Co-ordination of the flow of materials, information and finances in multi-national companies effectively is still a huge challenge. The objective of managing all links of the supply chain is to increase competitiveness. This is possible because individual organizational units are not responsible individually for the competitiveness of their products and services in the eyes of the end customer but the responsibility lies with the supply chain as a whole. Hence competitiveness shifted from individual companies in the supply chain. There are two broad ways to improve the competitiveness of the supply chain. One is the integration (or co-operation) of the organizations involved, and the second is better co-ordination of the flow of materials, information and finances. Overcoming organizational barriers, adjusting strategy and accelerating flows along the supply chain are the main subjects in this context.

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