What is Supply Chain Management?
Since the term “supply chain” contains the word “supply”, many people naturally assume that supply chain must have something to do with suppliers (i.e. purchasing or procurement). While it is true that supply chain management does encompass the purchasing and procurement functions, supply chain management actually extends well beyond those areas. Supply chain management is the practice of manufacturing and distributing physical goods as efficiently as possible.
Supply chain management encompasses the entire process of manufacturing and distributing physical goods, from supplier’s supplier to customer’s customer. Business functions that are within the realm of supply chain management include: forecasting and planning, procurement and purchasing, manufacturing and assembly, warehousing and distribution, shipping and transportation, returns and refurbishment, inventory management and order management. Or, stated more simply, supply chain management includes the functions: plan, buy, make, store, move, sell and return.
For example, let’s look at [a very simplified version of] the processes that created the computer monitor upon which you are probably reading this text. The monitor was most likely assembled using components supplied by many companies in several different countries. The circuit boards and computer chips that control the monitor’s functions may have been manufactured in Singapore or Malaysia. The CRT may have been manufactured in Mexico. The plastic casing may have been injection-molded in China. And the final assembly of those components may have taken place in Texas. What if the Texas plant is ready to assemble 1,000 monitors, but the plastic casings didn’t arrive from China in time? And what if a computer company (e.g. Compaq) is waiting for those monitors so they can package them together with 1,000 computers? And