What is Supply Chain Management?

Supply chain management is the combination of the enterprise strategies, business process and information technologies that integrates the suppliers of raw materials or components, the manufacturers or assemblers of the finished products, and distributors of the products or services into one cohesive process to include demand forecasting, materials requisition, order processing, order fulfillment, transportation services, receiving, invoicing, and payment processing.

While ERP and CRM systems are intended to re-engineer internal business processes to archieve better resource planning and coordination across departments, SCM systems are utilized to facilitate the coordination with outside business entities, or in the scope of extended enterprise. SCM usually refers to the redesign of supply chain processes in order to achieve streamlining. It is generally performed only by large corporations with large suppliers. B2B exchange can extend Supply Chain Management to all trading partners regardless of size by providing a central location to integrate information from all supply chain participants.

Participants in a Supply Chain

	Suppliers - They are organizations that provide goods and/or services to a purchasing organization (a manufacturer or a distributor). It is often used synonymously with vendors but may also refer to an internal company resource.
	Manufacturers - They are the companies engaged in the original production and assembly of products, equipment or services. They sometime refer to companies that purchase such products or services manufactured or assembled in accordance with company specifications.
	Distributors - Those are the external entities that sell for suppliers or manufacturers directly and often collects all payments from customers and maintains an inventory of the supplier's or manufacturer's products.

Processes of Supply Chain Management

	Demand Planning and Forecasting - Accurate demand forecasting is considered one of critical success factors in supply chain management. Supply chain software systems often utilize sophisticated mathematical models for predicating future demand from historical data. The accuracy of the demand forecasting is largely dependent on how abnormal data is treated in the demand forecasting. Demand forecasting is an ongoing process. Supply chain management systems can generate alerts at the frequencies of user preference, whether it's on a weekly, or monthly basis.
	Procurement - This is the process of choosing the suppliers that will deliver the goods and services you need to manufacture or assembly your products or to create your services. It involves price negotiation, receiving, and verifying the shipments. Supply chain management systems can be integrated with industry-specific B2B exchanges to automate the procurement processes.
	Manufacturing and Assembly - Raw components are assembled into final products or raw materials are manufactured into finished goods. Manufacturing involves the activities of production, testing, packaging and preparation for delivery.
	Distribution - Products or services are delivered to consumers. Distribution involves warehousing, delivering, invoicing and payment collection.
	Return - Return and refund are important parts and also the problem parts of supply chain management. Supply chain management systems should have infrastructure in place for receiving defective and excess products back from customers.

Supply Chain Management: a System perspective

What is Supply Chain Management

Supply Chain Management (SCM) is a business system of enterprise strategies, business processes and information technologies for improving the planning, execution and collaboration of material flows, information flows, financial flows and workforce flows in the supply chain. SCM is supported by modular software applications that integrate activities across organizations, from demand forecasting, product planning, parts purchasing, inventory control, manufacturing, product assembly to product distribution.

A System of Supply Chain Management

SCM is a social or soft system which has goals, components, processes and boundary.

Goals of SCM

	to reduce inventory cost,
	to increase sales
	to improve the coordination and the collaboration with suppliers, manufacturers and distributors.

Components of SCM System - The components of an supply chain system consists of 1) supply chain software and hardware, 2) supply chain business processes and 3) users of SCM system.

	SCM Software and Hardware - The core of an SCM system is SCM software. Supply chain software is module based application. Each software module automates business activities of a functional area in the supply chain. UNIX is the most common operating system for running SCM software
	Business Processes - Business processes of supply chain includes supply chain planning, execution and collaboration. and operational control.
	Users - The users of SCM systems are workers of supply chain participants at all levels.

Processes of Supply Chain Management

	Demand Planning and Forecasting - A critical success factor to supply chain management is accurate demand forecasting. Supply chain software systems utilize sophisticated mathematical models for predicating future demand from historical data.
	Procurement - This is the process of choosing the suppliers that will deliver the goods and services you need to manufacture or assembly your products or create your services. It involves price negotiation, receiving, and verifying the shipments.
	Manufacturing and Assembly - Raw components are assembled into final products or raw materials are manufactured into finished goods.
	Distribution - This is the process of delivering your products or services to consumers. Distribution involves warehousing, delivering, invoicing and payment collection.
	Return - Return and refund are important parts and also the problem parts of supply chain management.

Boundary of the SCM Systems - The boundary of a SCM system is the boundary of extended enterprise which includes the company, suppliers, partners, distributors and customers.

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