In: Operations Management
What is supply chain management? How does it differ from logistics? Define and explain the different types of inventory costs that managers must consider in making replenishment decisions. How can these costs be determined in practice?
Supply chain management(SCM) is the management of the flow of
goods and services and integrates all processes that turn raw
materials into final products. It includes the activation of
supply-related business activities in order to value customers and
gain a competitive advantage in the market.
SCM is a supplier's effort to develop and implement a supply chain
that is as efficient and cost-effective as possible. The supply
chain covers everything from production to product development to
the information systems needed to lead these efforts.
SCM typically seeks to control, center, or link production, supply,
and distribution of products. By managing the supply chain,
companies can reduce unnecessary costs and deliver products to
consumers faster. This is done by maintaining strict control over
local stocks, local production, distribution, sales and inventory
of trading companies.
A supply chain is a network of people, organizations, resources,
activities and technologies involved in the production and sale of
products or services. The supply chain begins with the delivery of
raw materials from the supplier to the manufacturer and ends with
the distribution of the finished product or service to the end
user.
SCM monitors every touch of the company's products or services from
inception to final sales. With multiple supply chain locations that
can add value through efficiency or lose value through cost
increases, the right SCM can increase revenue, reduce costs, and
hurt companies.
For example, a company can provide a flu sample that allows it to
accurately predict the required stock of overdose, creating a
low-efficiency waste supply chain. By using this SCM, the company
can reduce all related inventory and inventory, such as warehousing
and shipping costs.