Supply chain management definition

Integration of key business processes, starting from the end user and include all providers of goods, services and information that add value to the benefit of this person.

SCM is one of modern strategic concepts, which include logistics in the broadest sense – from the purchase of materials and complementary to the delivery of the finished product to the consumer.

The appearance of the SCM concept is no less revolutionary than the advent of the MRP II concept in the 70s of the twentieth century.

Logistics
Planning process, organization and control of material flows, their storage and preservation, providing adequate information about their movement from place of loading to destination to ensure the quality meet customer expectations.

SCM methodology
SCM is a methodology and, above all, a component of business strategy and then – a subsystem of the corporate information system.
The value of the product is formed throughout the logistics chain, starting from the purchase of materials and complementary, but the greatest impact is the last stage – the sale of goods to the end user;
The value of goods depends on the effectiveness of all operations of the logistics chain, including transport and marketing, not just the stage of actual sale;
The most manageable in terms of values ​​is the early stages – the production of goods and the most sensitive past – those of the sale.

SCM, principles
Sales (distribution) network in which the necessary goods are delivered in due time, the necessary space and with minimal costs;
Process of planning, implementation and control (in terms of cost reduction), the flows of raw materials, WIP, finished goods, service and related information – from the point of occurrence of the query to its implementation, including import, export internal and external displacements, ie to the full satisfaction of the client;
Logistics operations, covering the product lifecycle (development, production, sales and service).
Business strategy, ensuring effective management of material, financial and information flows for their synchronization consistently associated or networked organizational structures.
Optimized business processes at all levels of the enterprise;

The term – “Supply Chain Management” is proposed by U.S. advisers (in particular the company “Arthur Andersen”) in the early 80s of the twentieth century and subsequently gained popularity.

It is believed that SCM methodology is a development methodology JIT (Just-In-Time – just in time).

The first effective SCM – projects realized in 1990 year. They need to encourage companies to improve relationships with resource suppliers, customers and logistics firms.

Stages of development
0-Phase
Passive function of purchasing materials and complementary oriented paper documents.

1st phase
SCM-concept is seen as an integrated logistics, located outside the central company, including customers and suppliers It solves tasks of management of supply, production, distribution and coordination of logistics company with resource suppliers, customers and logistics firms.

2nd phase
SCM integrates the composition of corporate information systems, particularly ERP / CSRP class, maintaining an adequate supply of products and services in the right place, just in time and with optimal logistics costs.
From the perspective of the “genesis” of management and planning activities of the company, SCM-solutions occupy a peculiar niche between ERP-and CRM-systems:

Traditional ERP-systems are chiefly internal business of the company;
CRM-solutions include interactions with the external market;
SCM-solutions-oriented optimization of both internal resources and contractors are focused on the company.
SCM tasks

Can be divided into six areas which is focused on managing supply chain: production, delivery, location, inventory, transportation and information.

All decisions on managing supply chains are divided into two categories: strategic (strategic) and tactical (operational).

SCM, functions
Study of demand and supply of goods optimally meet customer needs;
Processing of requests and queries from different users;
Scheduling deliveries so that goods can not zalezhava in warehouses and no unmet demand;
Creating long-term relationships with suppliers, distributors and end users;
Effective management of the Sales network.
SCM, tasks
SCM solve problems of coordination, planning and management processes of sourcing, production, storage and delivery of goods / services for the end user.

SCM-logistics operations system automates the entire lifecycle of products. If they decide the following tasks:
Interaction with suppliers: Search, forming a contract, account;
Warehouse management (system control acceptance of the goods, report the characteristics of its storage, inform employees of the store);
Development of transport routes, places for construction of new factories, warehouses, etc.
Optimization of transport operations (calculating the value and terms of carriage with a different mode of transport, taking into account the customs costs, the cost of loading and unloading, etc.);
Interaction with distributors (clearance requests, mutual settlements);
Preparation of data to develop pricing strategy of the organization;
Accurate assessment of the value added generated by manufacturing (SCM-system controls the whole process of converting raw materials);
Analysis of production needs and resources automatically procure basis of information received;
Analysis of data search and suggestions on this basis and adjust production plans;
Analysis of complex information across the entire logistics chain.

Examples:
Building a structure for distribution and storage system for materials and finished products to reduce operating costs;
Optimize costs through an appropriate scheme of supply goods to certain markets;
Determining the right for a regional market place for the production of goods

As a business owner, understanding the supply chain management definition and its advantages is not such a difficult task. Although it sounds complicated, detailed and hard for a newbie in economics and management, it is actually very easy. Grab a pen and a paper and draw five boxes in a row, then combine them with arrows. The first one is the raw materials supplier. Whether it is food, wood or any other material, it all starts with the raw state. Read the rest of this entry »

The supply chain management definition is very easy to understand. Any business goes through three basic stages, from acquiring, through producing and to putting out for sale. Decades ago, these three steps were handled all together, without a particular connection or plan between them. There are still companies who refuse to implement the new system, whether they cannot afford it or they just don’t have the necessary technology. Read the rest of this entry »

Failing to understand and ignoring the supply chain management definition will lead to a very poorly managed business, therefore you have to take this aspect into consideration. Without a plan, it is not just hard, but close to impossible to successfully lead a business. Even if you manage to keep it going, you probably encounter a lot of problems and sometimes the service you provide is probably not even available to the customers. If you don’t have the proper organization, such things do happen. And this proper organization is actually the supply chain management definition.
Read the rest of this entry »