Supply Chain Management Definition – The Basics of Supply Chain Management

Getting a supply chain management definition is essential for understanding the main concept. Use this guide to find this concept defined and to understand the basic ideas behind it. Even though the concept may seem complex, it is actually not that difficult to understand.

Supply chain management (SCM) is the management of a network of businesses that are involved in the production of a specific product or service supplied to the end customer. A broader supply chain management definition can be given as well. SCM is the systematic and strategic coordination of business functions and the tactics across these functions. This coordination can be carried out within a single company or within a network of companies involved in the production of a single product. The purpose of SCM is to improve the performance of each of the businesses within the supply chain and of the entire chain.

The formal supply chain management definition can be explained very simply. There are usually different businesses involved in the production of a single product. In the simplest case, one of the companies produces the raw materials while the next one uses them to produce the ready product. It may be possible for a third one to provide the packaging. In general, the chains are much more complex, but this example illustrates the concept and the supply chain management definition well.

If the businesses within a supply chain work without the coordination, each one of them will suffer from productive inefficiency to one extent or another. This is where SCM comes in. Provided that the physical flow of materials and goods and the information flow are managed, each of the businesses within the chain and the chain itself will be more productive. In turn, each element and the system itself gain competitive advantage and eventually make more profits.

Despite the common misconception that some people believe in when seeing the supply chain management definition, SCM is not restricted to logistics solely. It is designed to solve problems related to the entire distribution network which may include production facilities, distribution centers and warehouses. It is involved in devising an entire strategy for distribution that aims to be productively efficient and cost efficient. The managers are responsible for monitoring and controlling the implementation of the strategy as well.

SCM involves information management, inventory management and even cash flow management. These are all activities that are considered when a supply chain management definition is made. Managers coordinate the information flow between businesses within the network. They are also devising plans for the coordination of the businesses based on this information. SCM is involved actively in managing inventories and cash flows within the chain. These are different activities compared to inventory and cash flow management within individual businesses.

Now you know the supply chain management definition. You also understand the basic concepts behind it. In general, it involves a complex methodology and the work of a lot of people. Even though SCM is relatively new, there are different models that managers can adopt and apply.