Definition: Supply chain management is a set of activities related to planning, supervision and control of sequential processes from the procurement of suppliers to customer’s deliveries, with the purpose of making the method more efficient and effective. This is a term that brings an integrated, cross-functional view of the supply chain with the aim of increasing alignment, synchronization and collaboration.
What Does Supply Chain Management Mean?
Supply chain management is a function that should exist, to some extent, in all organizations but it becomes crucial as the number and variety of suppliers and customers increases. It is mainly related to the movement of materials, intermediate and finished products as well as information through different stages along the value chain. Its primary responsibility is to facilitate a set of common goals among separate units.
Since every functional department tend to have its own, specialized approach, supply chain management works to integrate their diverse and sometimes conflicting visions. It aims to interconnect tasks that otherwise lack of coordination. Certainly, division of labor is needed to encourage higher levels of expertise but at the same time companies need to force integration among them.
The overall objective is minimizing delays and errors that ultimately affect company competitiveness, therefore creating a more productive environment that also increases the profitability of the business as a whole.
Example
Krein Co. is a producer and marketer of several packaged foods. The Executive VP realized that unit costs increased and the company lost some relevant customers due to frequent delays in delivery schedules. He decided to create a Supply Chain Management Department to improve integration among different departments, namely procurement, warehouse and inventory, production, marketing and dispatch.
This new management function even expanded the scope towards other companies to outsource intermediate goods as a way to make the whole process more efficient and less costly. The overall outcome was more linked functions with positive results in unit costs along with a higher level of customer satisfaction.
