The concept of Supply Chain Management (SCM) is based the fact that virtually every product or service that is created or delivered to an end user actually represents the cumulative efforts of many organizations. Collectively these organizations are referred to as the “supply chain”. Until recently, most organizations large and small have only focused on the activities that were occurring specifically within their operations with little emphasis of what was happening beyond their “four walls”. Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer; resulting in disjointed and many times ineffective supply chains.
Fast forward to today’s dynamic business environment with increasingly stiff global competition, cutting edge technology and a very knowledgeable and demanding consumer (thanks in large part to the internet) – companies have learned (many times the hard way) how critical SCM is to their success. Supply chain management has evolved in the last 20 years from a cost center into a long term revenue generator and new source of strategic competitive advantage and core competency for businesses.
Supply chain management is about managing the flow of materials and information through the manufacturing process, including raw materials, work in process and finished goods. It involves the active and conscious management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage through effective & efficient processes, systems and relationships.
The organizations that make up the supply chain are “linked” together through physical flows and information 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 that 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.
Reference: Dr. Robert Handfield, Director of SCRC, Bank of America, University Distinguished Professor of SCM