Supply chain management process
An overview of activities involved in supply chain management and in keeping your supply chain efficient and cost-effective.
Supply chain management (SCM) is a sequence of processes in product distribution. It is a way of managing the flow of goods and services to and from your business in the most efficient and cost-effective way possible.
What is supply chain management?
The term 'supply chain management' describes overseeing all movement and storage of:
- raw materials needed to make a product or service
- work-in-process information and inventory
- finished goods from production, through distribution and to the customer
The main function of supply chain management is to optimise the flow of materials, information and financials in key areas of product distribution.
Key supply chain management processes
An effective supply chain management process involves five basic stages:
1. Planning
This involves creating strategic plans to manage all resources needed for getting your product or service to the customers. It also includes setting ways to monitor supply chain efficiency, including costs and delivery of goods or services.
2. Developing
During this stage, you choose suppliers of raw materials that you need for your product or service. You also develop your pricing, delivery and payment process, and build a strong relationship with your suppliers.
3. Making
This is the manufacturing stage of the process. It involves the production, testing and packaging of goods or services, and getting ready to deliver to customers. Monitoring is essential at this stage - including measuring product or service quality levels, production output and worker productivity.
4. Delivering
Delivery, or the logistics stage, covers all the steps from handling customer queries to choosing distribution and transport. For example, organising the receipt of orders from customers, developing a network of warehouses and carriers, and setting up invoicing systems for payments.
5. Returning
The final stage of the process involves receiving damaged products back from customers, including identifying product condition, authorising returns and giving refunds.
These processes can have a major impact on the success of your supply chain. You can use specialist supply chain management software to improve them and achieve efficiencies in your business.