What is Supply Chain Management: A Simple Guide

Understand the meaning, definition, and explanation of supply chain management: a simple guide

What is Supply Chain Management?

Supply chain management (SCM) is a crucial aspect of any business that involves the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective and efficient ways possible.

Components of Supply Chain Management

Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities. The organizations that make up the supply chain are “linked” together through physical flows and information flows.

Physical Flows

Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows.

Information Flows

Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain.

Importance of Supply Chain Management

Effective supply chain management offers numerous benefits such as reduced costs, improved customer service, and increased financial performance. It is a key to productivity and competitiveness of manufacturing and service enterprises.

Reduced Costs

SCM can help lower the cost of doing business. This is achieved by eliminating unnecessary steps in the supply chain, reducing waste, and improving efficiency.

Improved Customer Service

By ensuring the right products are delivered to the right place at the right time, SCM can greatly enhance customer satisfaction.

Increased Financial Performance

A well-managed supply chain can positively impact a company’s bottom line. It can lead to increased sales and revenue, better return on investment, and improved cash flow.

How Supply Chain Management Works

Supply chain management is a complex undertaking that involves planning, implementing, and controlling the operations of the supply chain with the purpose of satisfying customer requirements as efficiently as possible.


This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service.


The implementation phase involves the coordination and management of supply chain activities to deliver products or services.


This phase involves the measurement of performance and the comparison of actual performance with planned performance. This helps to ensure that the supply chain is operating as intended and that it is delivering value to the business.

In essence, supply chain management integrates supply and demand management within and across companies. It is a vital part of any business and is essential for company success and customer satisfaction.


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