Supply chain management (SCM) is the process of managing the flow of materials, information and services as the materials flow from raw material suppliers to factories and warehouses to end users. The idea behind SCM is to cut costs and improve weak, expensive and inefficient processes in order to realize financial gains. By understanding SCM processes, you can reduce the uncertainty and risks in the supply chain, which will allow your business to reap the benefits of a leaner operation.
The inventory process deals with the actual on-hand quantities of items and materials that the business needs to operate. Some inventory SCM processes include just-in-time inventory (JIT). When JIT is used, items are produced only as needed, thus preventing big backlogs of expired or unwanted items. Automatic ordering systems are often used in JIT, which means a system is in place that keeps track of inventory and automatically places an order for new materials when those materials are running low.
One method of SCM involves using a formal planning process. During the planning process, the company determines its material needs by looking at factors such as past sales and anticipated future demand. The company then puts a plan in place in order to establish a system for acquiring the materials through the supply chain. During the planning phase, it is also important to identify any problems within the supply chain. This kind of planning yields a great deal of agility.
Implementation of the SCM may include supplier management. For example, if you were in charge of SCM, then supplier management would involve setting up a meeting with the supplier of a given type of raw material. During the meeting, you would give the supplier a set of specifications or standards regarding what you expect. The process of supplier management may also include developing these specifications or searching for new suppliers, if existing suppliers cannot meet your demands.
Transportation processes in SCM cover all aspects of how goods are moved between locations. This might include radio-guided loads for trucks, as well as the sharing of various transport options among manufacturers and vendors so that no truck goes away empty and unloaded.