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What is Supply Chain Management?

By Edited Jun 7, 2016 1 1

In today's globalized world, there is one new business area that has become more important than any other. It isn't the general and old techniques that you've learned in graduate school or the masters degrees. It isn't the usual marketing concepts or financial analysis that you have seen throughout the year either. This new school of thought for managing a company is widely known as supply chain management.

While in previous times it was markets and financial factors that most influenced the way business operated and gained their margins - today in a world where business can't afford not to be global, it is supply chain management and global logistics that lead the decision making processes.

In order to understand the importance of what is the supply chain and its management, we need to first understand what it really means. Supply chain management is a very wide concept that includes concepts such as inventories, warehousing, logistics, transportation, planning, order processing, and a fast, reliable and cheap network where your costs are in control.

The reason why managing your supply chain has become so much more important than in previous times is because companies these days produce their products all over the world and sell it even somewhere else. Perhaps the raw materials will be bought in one country, then the half product is produced somewhere else, and then the finished good is shipped elsewhere for selling. In each of these cases, you must sure to plan perfectly and wisely.

The disadvantages of a bad sourcing strategy can induce enormous pressure on your working capital and as well as making your customers very unhappy. In fact, a badly managed supply chain can cost your company millions of dollars and force your company into bankrupcy. This is of course more important for smaller suppliers who perhaps will lose all their business if they poorly supply their primary customer, and lose that business.

While the area of supply chain management is too long to cover in one post, it essentially boils down to planning and organizing everything from the moment you order your raw materials until the final end customer purchases the product. Everything along that chain, except for actually producing the product, is the responsibility of the supply chain organization. This is why global supply chains are becoming increasingly more difficult to manage, especially with all the uncertainty that is present in this field. Some things such as transportation failures, product rejections, customer change of plans can really cost you a hefty penny.

This field use to be considered a sixth sense or a form of art, but it has become much too important for that. Managing the supply chain is now a science that you need to learn, practice, and master if you want to stay alive and not be eaten up by competition cropping up from all sides of the earth.

I hope you enjoyed this introduction into supply chain management, and stay tuned as I will be covering the topic in more detail.

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Comments

Sep 9, 2009 10:19pm
djodcouk
I'm looking forward to some definition for some supply chain maangement terms in later barrels - I find them useful in my work!
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