Supply chain management is the process of managing the entire production flow of a good or service, from the raw components to delivering the final product to the consumer . It involves creating a network of suppliers that move the product along from the suppliers of raw materials to those organizations that deal directly with users . The goal of supply chain management is to maximize quality, delivery, customer experience, and profitability .
The five components of traditional supply chain management systems are as follows :
– Plan and manage all resources required to meet customer demand for a companys product or service.
– Determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers, and meets company goals.
– Choose suppliers to provide the goods and services needed to create the product.
– Establish processes to monitor and manage supplier relationships. Key processes include ordering, receiving, managing inventory, and authorizing supplier payments.
– Organize the activities required to accept raw materials, manufacture the product, test for quality, package for shipping, and schedule for delivery.
Effective supply chain management systems minimize cost, waste, and time in the production cycle . The industry standard has become a just-in-time supply chain where retail sales automatically signal replenishment orders to manufacturers. Retail shelves can then be restocked almost as quickly as product is sold . By analyzing partner data, effective supply chain management increases value to the supply chain cycle by identifying potential problems before they occur, optimizing price dynamically for seasonal products with limited shelf life, and improving the allocation of available to promise inventory .