Definition of Supply Chain Management, Objectives and Functions

Supply chain management is the foundation that supports the fulfillment of consumer needs carried out by manufacturing, retail and wholesale businesses.

In other words, a sound SCM system is a critical success factor for these businesses. The supply chain in every business can be different. The most basic version includes the company, its suppliers, and the company’s customers.

Definition of Supply Chain Management
Definition of Supply Chain Management

However, for larger companies, the scope is also broader. The proper use of SCM can provide complete analysis in managing products and materials accurately.

What is Supply Chain Management?

Supply chain management is a series of activities required to plan, control, and execute product flows. This includes obtaining raw materials, production processes, and the distribution of products to end consumers in the most efficient and cost-effective manner. A good Supply Chain Management software will get all the visibility and complete analysis to help you accurately manage your products and materials and keep up with the fast-changing market.

According to Investopedia, SCM is a vast and complex business that relies on every partner – from suppliers to manufacturers and beyond – to run well. Supply chain management aims to maximize customer value and gain a competitive advantage in the market. Achieving this requires various efforts, both business strategies, and special software.

Supply Chain Management Goals

The main objective of supply chain management is to manage and coordinate supply & demand effectively. Thus, problems arising in the SCM process can be handled effectively and efficiently. Here are the issues that usually occur:

Procurement of goods and management of suppliers
Relationship management with customers or clients
Determining the level of outsourcing
Your business can excel in today’s increasingly competitive market competition by overcoming these problems. Therefore, companies must produce products that are of high quality, inexpensive, have various attractive variants, and are delivered on time. Now, you can find out how much expense you have to prepare to get the complete supply chain management in Indonesia through a price calculation scheme.

Supply Chain Management Function

Supply Chain Management has several functions that can help companies accurately manage products and materials. The primary part of SCM is to convert raw materials into a finished product that can be sold to end consumers. The primary function of supply chain management is related to various physical costs such as material costs, storage costs, special production costs, transportation costs, and so on.

Furthermore, the function of SCM is as an intermediary between the market and the supply chain. In this case, SCM aims to ensure that the supply chain in the market is well distributed. The last function of SCM is controlling and giving instructions to comply with the established work standards. This is necessary so that companies can follow market developments by listening to consumer aspirations regarding supply chain products available in the market.