What is supply chain management?
- Any company that develops and creates a product very often uses raw materials for its creation, which they acquire from a business partner.
- In addition, in order for the goods to fall into the hands of the buyer, before that the goods must be stored somewhere and transported to the point of sale.
- Thus, creating separate supply chain that need to be managed for the non-stop and efficient operation of all companies participating in this chain.
- Depending on the size of the company and the complexity of production, the supply chain can be large or small (by the number of participants).
Thus, it can be concluded that supply chain management is the process of creating, controlling, and managing the interrelationships of companies that participate in the creation, storage, and transportation of goods to the consumer.
What is included in the supply chain?
Regardless of the size of companies and production volumes, most often the supply chain has a standard structure and can differ only in the number of participants.
The first link in the chain is the customer. It is from the moment the customer contacts the sales department of the company that the process of creation or transportation (if it is available) of the goods begins.
The second link in the chain is planning and supply. In the absence of the necessary raw materials for the creation of the product, the supply department determines the quantity of raw materials and orders it from the supplier by a certain date.
Further follows the third link in the chain is production. Before this, the quality of the raw material and its identity to the declared requirements of the customer must be checked.
And finally, the last link in the chain is the transportation of the finished product to the customer or to the point of sale.
Why do you need supply chain management?
Supply chain management is one of the most complex and processes in today’s business environment. This is primarily due to the complexity of combining the organizational, management, information, and other systems of different participants in the supply chain. However, for all the complexity, the supply chain management system has a number of advantages.
For example, such a system allows to reduce the processing time of the order and the planning process. In addition, the system allows to significantly reduce the costs of raw materials and production, which further undoubtedly affects the final cost of the goods.
The development of information technologies predetermined the creation of special programs and software for business solutions in supply chain management. To date, many companies have already understood the benefits of the system and invest heavily in the development of the supply chain management system. So, companies only increase their own cost in the business world.