Importance of Supply Chain Management

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The Importance of Supply Chain Management

Supply chain management (SCM) is very important and effective to all companies. David Simchi-Levi, Philip Kaminsky, and Edith Simchi-Levi defines supply chain management as “a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements.” Supply chain management, also called logistics network, includes suppliers, industrialized centers, warehouses, distributions centers, and retail outlets, as well as unprocessed materials, work-in-progress stock, and finished goods that run linking the facilities. SCM is all about having the right product in the right place, at the right price, at the right time and in the right condition. A good way to explain supply chain management is to use a worldwide known restaurant for an example, because depending on where the location of the restaurant is tells you where the inventory comes from. It is essential for restaurants to have enough inventory to cover the customer demand no matter what. For this, supply chain management is extremely crucial and can make or break a business. Charles Dominick explains, “the three types of entities of a supply chain: customers, a producer, and the producer's suppliers. The extended supply chain includes customers’ customers and suppliers’ suppliers. SCM oversees and optimizes the processes of acquiring inputs from suppliers (purchasing), converting those inputs into a finished product (production), and delivering those products – or outputs - to customers (fulfillment).” From all the types of entities listed before, it falls on the supply chain manager’s job to choose where to find manufacturing and delivery services, how to send the goods and materials to those services, and from which parts of the world to...
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