It’s important to understand the basics of what supply chain management is before moving into more specific details. Supply chain management (SCM) is “the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer”. This type of management ensures that everything moving along the supply chain for any business is done in an efficient and organized manner. SCM is a huge operation and needs to be carefully managed in order to achieve success because a tiny mistake could lead to problems for every person involved in the process, from the company manufacturing the raw materials all the way down to the consumer at the end of the line.
Principles it’s based on
The first principle is that every product and service that eventually reaches the consumer is successful after the efforts of multiple people and organizations. Many people work toward developing the finished project, which is what the term “supply chain” applies to in the process. The other principle that SCM is based upon is that, in the past, businesses only focused on their part of the chain. It was rare that a single organization would pay significant attention to every step toward getting the finished product or service. Now, SCM recognizes the amount of people and effort going into producing goods or services and also pays attention to managing the various steps of this procedure.
Types of SCM
The movement of product through the supply chain is also called the “flow” and there are three different types: product, information, and financial. The product flow deals exclusively with the product going through the supply chain all the way to the customer, and then any issues such as returns or customer service. The information flow deals with sending orders and tracking those orders until they’re delivered. Finally, financial relates to payment schedules, credit terms, and ownership details. Any single product will go through all three of these flows and each is a vital aspect of manufacturing a product.
An actual example of a company focusing more on SCM is Walgreens Boots Alliance Inc. Walgreens is the second largest pharmaceutical company in the United States and they’ve recently realized the importance of focusing on the entire process of developing their medicines. This year, they’ve begun paying more attention to the supply chain. They’ve since put more money into the technology aspect of their supply chain and gathered data to help predict demand for different types of medicines so they can be prepared at different periods throughout the year, like cold and flu season. Their goal is to reduce the amount of extra inventory and thus reduce costs associated with producing and transporting unnecessary products.