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What is Supply Chain Management?

By Bisk
What is Supply Chain Management?

Supply chain management is not just a process for reducing costs and achieving greater operational efficiencies within an organization. Although these are important considerations, modern supply chain management involves the strategic alignment of end-to-end business processes to achieve market and economic value, as well as competitive advantage.

Supply chain management is achieved by an organization proactively adopting initiatives to move suppliers and customers into collaborative relationships for mutual gain. Business professionals who want to make a significant impact on the efficiency, effectiveness or profitability of their organizations should consider learning more about supply chain management and its value for companies operating in a competitive global marketplace.

How Supply Chain Management Increases Efficiency and Effectiveness

It may now seem like ancient history, but it’s less than two decades since the average turnaround time for getting goods from warehouse to customer was anywhere from two weeks to a month. Companies typically followed a time-consuming and manpower-heavy process that began with creating an order that then was disseminated via mail, fax, telephone or data interchange. Manual or computerized systems were used to process the order, authorize credit and assign the request to the appropriate inventory facility for shipping.

Even if the process avoided any bumps along the way, consumers could expect a lengthy wait for their merchandise. But with so many variables at play, there often were delays, whether as the result of poorly written work orders, misplaced merchandise or shipment snags.

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As noted by the authors of Supply Chain Logistics Management, companies sought to compensate for these inefficiencies, including by the stocking of excess inventory at numerous points along their supply chains. This approach, which had its roots in the Industrial Revolution, became established practice through the 20th century, maintaining its primacy in the absence of more effective options.

The dawn of the digital age, however, has brought wholesale transformation to the world of commerce. “Information characterized by speed, accessibility, accuracy and most of all relevancy are now the norm,” according to Supply Chain Logistics Management, which was co-authored by three Michigan State University (MSU) professors and an MSU graduate.

This new norm – combined with growing connectivity among business partners – is driving the growth of supply chain management. Traditional practices in purchasing, marketing, transportation and manufacturing are being improved and reinvented by managers seeking to capitalize on evolving capabilities, particularly those related to advances in information technology.

Today, the timeline from order to delivery is often measured in hours, rather than days or weeks. At the same time, the business management philosophy known as Six Sigma is the catalyst for a growing emphasis on eliminating defects and production failures. Previously the exception, perfection is becoming the expectation.

Increasing sophistication in IT and software options means that these advances are being secured with fewer resources, generating cost savings for companies and customers alike.

Supply Chain Management Is In Growing Demand

In the 21st century, supply chain management professionals are expected to possess the knowledge and capabilities to support the improved efficiency, effectiveness and profitability of modern businesses.

For large organizations, the ability to incorporate performance trade-offs across multiple functional areas, both internal and external, is critical. Meanwhile, small and mid-sized businesses must be able to deliver a unique value proposition in an increasingly competitive marketplace. As a result, supply chain management professionals are growing in importance across business types, industry sectors and global regions.

For progressive business leaders, the need for supply chain management knowledge and skills has never been greater.

Learn How Our Programs May Help Further Your Supply Chain Career Potential

Category: Supply Chain Management