What is supply chain management?

Supply chain management (SCM) is a process where a company analyzes and provides oversight to a product from its original point of origin all the way through to where it is consumed. This higher level view of the supply chain can help to identify areas where there is waste, delays, or other issues that can be corrected. When done properly, supply chain management can help to eliminate overhead and maximize the profitability of a given product. Good SCM will look at all aspects of production, including the following three key areas.

Flow of Materials

The materials that are used to create a product need to be managed properly in order to avoid any waste or other problems. By understanding where the materials are used, where they come from, how they get to the point where they are needed, and other factors, a company can take steps to optimize the whole process. It may also be possible to reduce or eliminate the need for certain materials by analyzing the product design.

Flow of Finances

The finances associated with the manufacturing of a product are very important, which is why the flow of finances is a key aspect of SCM. Understanding how much various things cost, which features add value, and other things, will lead to great opportunities for improvement. For example, a company may find that if they order specific parts in bulk, they can cut their expenses by a significant percentage. This will help to improve the flow of finances and benefit the bottom line.

Flow of Information

Information related to a product is another important, but often overlooked, aspect of supply chain management. In some cases, the product itself is information. This would be the case when designing software, architecture designs, and more. In other cases, the information about a product can be very valuable. Being able to look at the product design, for example, will provide significant opportunities for improvement.