Definition of Supply Chain Management:
Supply Chain Management supervises three major flows.
1. Product flow
2. Information flow
3. Finance flow
To fulfill the consumer’s requirements and expectations with minimum cost.
1.The Product flow:
The movement of products from the stage of raw material till the stage of the finished product is called product flow. The return of goods from the consumer to the producers also takes place in the product flow of supply chain management.
The Information flow conveys the orders for the product and shows the status of the product delivery.
The payment terms and credit periods are shown in the financial flow.
How does Supply Chain Management work in Business?
The Supply Chain Management combines and controls all processes of a business like procuring raw materials from the suppliers, manufacturing the goods, doing quality checks, shifting to distribution unit, managing inventory, warehousing and moving to wholesalers, managing logistics ,delivering to the retailer and finally in the hands of the end-user – (i.e.) consumer.
Why Supply Chain Management - SCM is important for business?
Supply chain management plays a vital role in business success. It encompasses the entire – end to end processes involving in the business. Substantial business growth & profit can be achieved by implementing an effective supply chain management.
Cuts down the Operational cost :
- Helps retailers by reducing the purchase cost – SCM avoids unnecessarily keeping expensive inventory unless the order is received.
- Helps manufacturers by minimizing the production cost – SCM monitors & ensures the raw material flow to the production plant in the right time and avoids shutdowns in the middle of production due to short/delayed supply of raw material during the production
Improves Customer Services:
- SCM controls the product & finance flow and assures for the prompt delivery of products at the right time with righty quantity – which makes the customer happy.
- An effective SCM let the business to offer better services “after-sales” to maintain customer relationship.
- Builds good customer relationships with an effective supply chain.
Increases the Finance Level
- The main goal of supply chain management is to minimize inventory and cost-effectively to maximize customer satisfaction. SCM helps the business to have lesser fixed assets such as buildings for warehouses/inventory.
- SCM speeds up the production process as well as the distribution process without delay, which in turn lets the consumer get products quickly and correctly. This will increase financial growth.
- SCM predicts the product demand in advance with the help of information flow and produces the products which are in demand and stops the production of unnecessary products.
- Makes better relationships with suppliers, transporters, and distributor that increases the smooth fund flow.
Supply Chain Management works well not only in business but also in social welfare at the time of natural disasters, medical emergencies and the extreme change of climates. It helps to provide basic needs, medicines, and power by its efficient supply chain networks.