Defining Supply Chain Management

In the simple sense, the supply chain is a “process umbrella” under which products are created and delivered to customers. From a structural standpoint, a supply chain refers to the complex network of relationships that organizations maintain with trading partners to source, manufacture, and deliver products.

As you can see from figure, a company’s supply chain encompasses the facilities where raw materials, intermediate products, and finished goods are acquired, transformed, stored, and sold. These facilities are connected by transportation links, along which materials and products flow. Ideally, the supply chain consists of multiple companies that function as efficiently and effectively as a single company, with full information visibility and accountability.

In a nutshell, SCM is the coordination of material, information, and financial flows between and among all the participating enterprises.

  • Material flows involve physical product flows from suppliers to customers through the chain, as well as the reverse flow via product returns, servicing, recycling, and disposal.

  • Information flows involve demand forecasts, order transmissions, and delivery status reports.

  • Financial flows involve credit card information, credit terms, payment schedules, and consignment and title ownership arrangements.