What is Supply Chain Management?

By Rackbeat March 17, 2022

When it comes to effective production, transparency, and value creation, Supply Chain Management (SCM) is one of the most important elements in your business’ production process.

But what does “Supply Chain” mean, and why is Supply Chain Management so important? Give this post a read, and get the answers to all your questions about SCM.

What is a “Supply Chain”?

“Supply Chain” illustrates how the process surrounding product production looks, from farm to table – meaning from the product is produced, as it finds its way to the consumer.

Depending on which type of product we’re talking about, there are a lot of different ways to illustrate the supply chain. The first link in the supply chain is usually either the raw materials being hewn from the ground or the production of the product. What happens next, however, varies greatly depending on how the product has been produced and how it is distributed.

A simple illustration of a supply chain can be found in a laptop. Here, the supply chain can be illustrated like this:

  1. Manufacturing: The first part in this chain is the production of the product – in this example, the laptop in the factory.
  2. Wholesaler: A wholesaler orders a large supply of laptops and sells them to a business, a consumer facing store.
  3. Consumer facing store: The store resells the computers to the end user
  4. End user: The end users buy a laptop in the store, and is as such the last part of the chain.

The above supply chain is simplified, and the modern supply chain is often considerably more complex and developed. In reality, there are a lot of different types of supply chains, that can not be organized in steps like the one above.

A reason for this could be that the company is recycling old and used products. That means that the linear ways of looking at raw material extraction- and production-links are no longer accurate in describing the product’s journey.

Also read: What is a WMS – and why is it important?

 

What is Supply Chain Management – and why is it important?

Supply Chain Management (abbreviated to SCM) is about strengthening the supply chain by optimizing the processes surround the different links in the chain.

In other words, this means that while doing Supply Chain Management, you are working to control and optimize the material- and information flows that stems from the raw material supplier (or the factory) to the end user. The goal of SCM therefore become optimizing links in the supply chain to create as much value as possible for the business.

There are many significant advantages to Supply Chain Management. Through SCM you can, among other things, achieve:

  • A better understanding of the risks related to the links of the supply chain
  • More control over- and improved collaboration with the suppliers
  • More influence over deliveries
  • Increased product quality
  • Reduced operational costs
  • Better credibility and improved company reputation

Supply Chain Management also has the great advantage that the company is granted a greater insight in production. The consumer’s interest in the creation of products is on the rise, in fact.

As sustainability is increasingly coming more and more into focus, the modern consumer is putting a greater and greater weight on production methods, packaging amounts, carbon emissions – and on the business’ ethics surrounding production as a whole. That means that it is continually becoming more and more important for the business to understand and control each link of the supply chain.

Supply Chain Management provides the opportunity for meeting the consumer’s interests and needs for transparency in the production processes – and that creates immense value on the business’ bottom line.

 

Get an overview of the supply chain with Rackbeat

Are you ready to master the supply chain and empower your business’ effectivity and productivity? Rackbeat is a cloud-based warehouse management system that gives you a 360-degree overview of your entire supply chain – from purchasing and sales all the way to delivering to the customer.

Read more about warehouse management for wholesale businesses here, and discover how Rackbeat can help you get an overview of your business’ supply chain.

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