What is SCM (Supply Chain Management)?

Global trade is built on two major principles: supply and demand. While the latter represents the people who need various products and services, the former represents those manufacturers and companies capable of providing them.

Everything involved in getting those goods from point A to Point B tends to fall under supply chain management. And thanks to technology, companies working at various points in that chain can now improve their abilities with supply chain software development services.

The History of SCM

Supply Chain Management (also referred to as SCM) is a crucial aspect of modern business operations. Put simply; it focuses around effectively coordinating the flow of goods, services, and information from suppliers to end customers.

What supply chain managers attempt to do is integrate and optimize the various activities that facilitate this movement. This generally involves actions such as procurement, production, transportation, warehousing, and distribution. In almost every case, the goal is to ensure the smooth functioning of the entire supply chain to reduce costs wherever possible.

The concept of SCM can be traced back to the early 20th century. This was when what we now know as the “global supply chain” was first coming to fruition. Even then, the costs associated with shipping goods across the country and around the world were so immense, that even minor improvements could save chain participants significant amounts of money.

As the world modernized, companies began to wonder what new measures of supply chain management efficiency they could implement, including Inventorsoft. Indeed, the growing complexity and interconnectedness of global suppliers and buyers has forced many managers to adopt innovative, more complex approaches. Today, thanks to advances in digital technology, there is a form of delivery to consider: the supply of chain management software.

How Does Supply Chain Management Work?

The answer to “what is supply chain management and how does it work” will vary depending on who you’re asking, their industry, and their position in the supply chain. However, there are some elements of the process that should remain the same no matter what. For example, most will consist of: 

Planning 

This is the process of strategizing and coordinating all necessary resources to fulfill the demand for a company's product or service. It involves establishing performance metrics to evaluate the efficiency and effectiveness of the chain and whether or not it can properly deliver the value consumers require. 

Procurement 

This is the act of selecting suppliers who can provide the required goods and services to support product creation. It also involves implementing procedures to monitor and manage relationships with suppliers. Key activities under the “procurement umbrella” include placing orders, receiving goods, inventory management, and authorizing payments. When it comes to specialist industries, such as aviation, for example, meticulous vetting is necessary as there are more extensive protocols and regulations that will need to be adhered to. This has to come into consideration when looking for a government and military aviation solution. This ensures that the chosen suppliers meet the rigorous standards for the necessary requirements.

Manufacturing

What is supply chain management without supply? In the context of SCM, manufacturing refers to the systematic organization of activities involved in receiving raw materials, creating the product, conducting quality tests, packaging for shipment, and generatig schedules for timely delivery.

Delivery

The delivery itself, often called “logistics,” is about getting the goods from Point A to Point B in the most cost-effective and efficient manner possible. This process includes the coordinated management of customer orders, scheduling, dispatching shipments, invoicing customers, and processing payments.

Returning

Even the best supply chains cannot claim a zero return rate. That’s why every network needs to establish a way to process and retrieve defective or unwanted products. Though they don’t always need to return to the supplier, these products require a designated destination for recycling or disposal. 

Throughout all of these steps, there is a continuous flow of information taking place. However, it wasn’t until the past few decades that companies began utilizing computer systems to help capture that data to improve demand forecasting, inventory management, and other aspects of their operations. 

Why is Supply Chain Management Important?

At this point, it should be relatively clear why supply chain management plays such a big role in providing the supply necessary to meet global product demand. However, there is even more to it than that. 

• For starters, SCM enables organizations to enhance customer satisfaction by ensuring product availability when and where needed. This creates the sense of competition necessary to foster innovation and promote new ideas and solutions. The company that can do it the fastest and for the least amount often gets the business. 
• By learning how to manage the flow of goods more effectively, companies can minimize stockouts, reduce lead times, and improve order fulfillment rates. This puts them in a better position to court customers. 
• Of course, one of the biggest reasons companies embrace SCM is because it allows them to improve operational efficiency, which can significantly reduce costs. For instance, by optimizing inventory levels, streamlining production processes, and improving transportation and logistics, organizations can avoid the expenses associated with holding excess inventory, transportation, and warehousing.
• Finally, supply chain management is important because it helps facilitate effective risk management. By closely monitoring and managing suppliers, organizations can maintain business continuity and minimize the impact of unforeseen events.

Industry 4.0 and SCM

In recent years, experts have claimed the world is hurdling toward what they call the “fourth industrial revolution,” or Industry 4.0. This is characterized by the integration of advanced technologies such as artificial intelligence, big data analytics, and the internet of things (IoT) into both manual and digital processes. 

As with the invention of supply chain management software, Industry 4.0 will have huge implications for SCM as an industry.  Many predict it will increase visibility and transparency, improve demand forecasting and planning, and even more operational efficiency than we can get from today’s solutions. 

Over the next decade, the supply chain will only become more agile and responsive as well as far more sustainable and eco-friendly. 

The Role of Supply Chain Management Software

For now, supply chain management software is crucial in enabling effective SCM in today's complex business environment. These solutions provide the sort of end-to-end visibility and control over supply chain activities that organizations need to monitor inventory levels, track shipments, and collaborate with suppliers and customers.

Not only has supply chain management software evolved over time to meet the challenges of globalization and the increasing complexity of supply chains, but it will continue to do so well into Industry 4.0 and beyond.