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In: Operations Management

What is supply chain management? How does it differ from logistics? Define and explain the different...

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?

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Expert Solution

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.


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