Supply chain management (SCM) is the process of converting the raw materials in to a product or service and deliver it to customers.
The following are five basic components of SCM.
It is the strategic activity of SCM and the companies need a perfect planning for managing all the resources that meet the customers demand for their product or service and satisfies the customer. SCM planning is to be developed in such a way that it costs effective and delivers high quality and value to customers.
Companies need to chose reliable suppliers or vendors to deliver the goods and services with which the company creates the product. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. The vendors should supply the inventory as per the demand and the SCM managers should also take care of the quality of the material supplied, and verify shipments, transfer them to the manufacturing facilities and authorizing supplier payments.
This is the manufacturing step in the SCM and the supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. In this step companies can measure quality levels, production output and worker productivity.
This is the step where the goods stored in the warehouses are delivered to the customers through an efficient distribution system as soon as the company receives the order from the customers and it is referred as logistics. This also includes an invoicing system to receive payments.
This is the step in the supply chain where the company receives back a defective and excess products from the customers. To effectively implement this process supply chain planners have to create a responsive and flexible network as it can be a problematic part of the supply chain for many companies.
According to Lambert and Cooper (2000) the following are the components of supply chain management:
- Planning and control
- Work structure
- Organization structure
- Product flow facility structure
- Information flow facility structure
- Management methods
- Power and leadership structure
- Risk and reward structure
- Culture and attitude