Supply Chain Management (SCM) is about managing the flow of materials, information & finance as they move in a process from supplier trough production, distribution and delivery of finished product to wholesaler and retailer and ultimately to the consumer, furthermore it often includes after-sales service and returns or recycling.
Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed).
Flows in supply chain management can be divided into three main flows:
- Product flow
Includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs.
- Information flow
Involves transmitting orders and updating the status of delivery
- Finances flow
consists of credit terms, payment schedules, and consignment and title ownership arrangements
Effective supply chain management demands comprehensive information systems allow the company to synchronize plans with customers and suppliers, collaborate in real time both inside and outside the enterprise, execute plans, adapt to a dynamic environment, and measure performance to objectives.
A recent study in the United States showed that the application of Supply Chain Management tools can result in the following benefits to a company as follow:
- 50% Reduction in inventory
- 40% Improvement in on-time delivery
- 27% reduction in order cycle time
- Nine fold reduction in out-of-stock-rates.
As the result, SCM leads an organization to provide a better service at a lower cost.
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