Definition of Supply Chain Management - What is SCM?
The definition of SCM is quickly explained: supply chain management is an approach to the development and management of complete logistics chains, which involves the handling of the entire production flow of a good or service - from raw components to the delivery of the final product to the consumer. It therefore includes the monitoring of production processes along the entire value chain from the supplier to the manufacturer to the retailer and consumer. SCM is responsible for coordinating and integrating the individual steps between the various participants in the supply chain. Goods, information, money and people should be optimally controlled and planned along the entire supply chain. SCM thus ensures better efficiency in logistics, the best possible use of all resources and economic success for the company. By managing the supply chain, companies can reduce additional costs and deliver products to the consumer faster.
There are three phases of supply chain management:
- Strategic supply chain management: decisions with long-term implications for a cost-effective design of the logistics network.
- Tactical supply chain management: Mittelfristige Umsetzung der Maßnahmen auf Basis der Strategie, Entscheidungen im Bereich Produktion, Bestand, Transport, Versand etc.
- Operational supply chain management: Short-term corporate decisions for sequence planning, loading, picking, etc.
Distinction from logistics
The terms logistics and supply chain management are often used interchangeably, but they are clearly different, even though they are interdependent. Logistics refers to the planning, control, execution and maintenance of the flow of goods within a company, while supply chain management is for the coordination and management of all supply chains of an organization. The main goal of optimal logistics is customer satisfaction, while SCM focuses mainly on competitive advantage. Logistics usually involves only one organization, while supply chain management always involves multiple parties and needs to be coordinated. SCM therefore goes beyond the logistics aspect and captures and analyzes all relevant processes in the supply chain.
What does a supply chain manager do?
The supply chain manager is responsible for SCM. He or she takes care of optimizing the supply chain and develops and manages the logistical flow of goods across companies. The tasks in supply chain management include the individual areas of logistics such as procurement, production, distribution, disposal and transport, but also corporate management, corporate accounting, controlling and marketing.
What are the goals of supply chain management?
The primary goal of supply chain management is to save costs and increase profits. The system-based optimization of supply chains should ensure smooth processes and optimize the flow of materials and information. Technological advances have also increased the demands on logistics and SCM in general. End customers expect fast and smooth delivery processes, and companies are always striving for higher sales and more efficient ways of working. Today's competition demands transparent and efficient supply chains. At the same time, costs should be kept as low as possible and companies' market shares should be increased. Today, many companies have global supply chains that present unique challenges. For example, cooperation and networking, as well as communication between all the players involved, must function smoothly. SCM helps to be able to react quickly and flexibly to sudden changes. Only successful supply chain management can guarantee companies that their goods are always in the right place at the right time. This is achieved through efficient and economical supply chains.
The goals at a glance
- Enabling just-in-time deliveries
- Low inventory levels without delivery bottlenecks
- Shorter and optimized processes
- Cost minimization
- Increase customer value
- Improve information flow
- Improved customer orientation
- Shorten delivery times
SCM ensures that processes are aligned with end-customer demand, thus meeting increasing requirements and ensuring flexibility (customer relationship management).
Sustainability in supply chain management
Consumers are increasingly demanding sustainable products, which is why this aspect is becoming an ever greater competitive factor. Supply chain management should therefore not only run efficiently and reliably, but also increasingly take the issue of sustainability into account. But what exactly does sustainability mean in the value chain? The management of materials, information and processes should also be carried out under economic, ecological and social aspects. To achieve this, all players (e.g. suppliers. distributors, partners and customers) along the supply chain must cooperate and take into account the environmental impact of their actions in order to meet the needs of the stakeholders.
- Environmental protection
- Consistently good working conditions for all stakeholders
- Develop economic processes
- Responsible use of resources
Modern supply chain management is based on paperless information exchange so that planning, procurement and production can be flexibly coordinated. Unforeseen events or changes can be responded to flexibly and at short notice. To make this possible, the IT systems of the companies and actors involved along the supply chain are networked via appropriate interfaces for data exchange.
Supply Chain Management Software
UTo successfully manage the entire supply chain, more and more companies are turning to SCM software with artificial intelligence to simplify processes. For example, the flow of goods between suppliers and customers or the flow of information can be optimized to simplify order communication. The flow of finances can also be digitized. For this purpose, business processes that were previously manual are transferred to digitized platforms. This leads to advances in digitization and sustainability as well as cost minimization. At the same time, waste is reduced and the status of individual company-wide processes can be tracked centrally. Software solutions for SCM processes thus help to create cross-company information transparency, establish correlations and accurately forecast inventories and capacities. They are usually used as add-ons via interfaces in addition to the ERP system.