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What Is Supply Chain Management and Why Is It Important?

Machine learning

Ever-growing rivalry on the modern market is pushing enterprises to seek more and more solutions to raise their competitiveness and generate more income. While virtually any component of a business has some potential for optimization, its central part, a supply chain, deserves particular attention. That is where supply chain management or SCM comes, maintaining an efficient flow of information, materials and finances within and outside a company.

Supply Chain Management Objectives and Tasks

While a supply chain is a network connecting all of the entities involved in the manufacturing and transportation of goods, SCM is aiming to make this connection smooth. In addition to it, SCM is focused on optimization to increase efficiency. Finally, it provides flexibility to adjust an existing supply chain to the changing conditions.

The functionality of SCM covers a wide scope of business operations. One of its tasks is forecasting the demand for both materials and finished products. Based on forecasting, material acquiring and production are planned.

SCM is also responsible for logistics and transportation for the delivery of sourced materials and ready-to-use goods. At the same time, SCM is managing resources such as the materials used for manufacturing, production assets, labor and time.

Finally, SCM is maintaining efficient information exchange.

Supply Chain Models and Their Management

SCM ensures a supply chain model is both efficient and responsive, which can be achieved with different approaches. Stable and mature companies prefer the continuous flow model, while industries prone to rapid changes are working better with the agile approach. The flexible model combines stability with demand peaks.

Companies specializing in goods with a short lifecycle will benefit from the fast chain approach.

There is also a specific efficient chain model for highly competitive industries with a strong emphasis on pricing. Moreover, SCM can provide maximum customization with the custom configured model.

Significance of Supply Chain Management

Supply chains are prone to certain typical issues which can be addressed with proper management.

Inadequacy of production scale in relation to the current product demand on the market is successfully solved by SCM based on Artificial Intelligence solutions of modern ERP systems. It is also true for sourcing and helps to estimate supply more effectively.

Forecasting methods make a supply chain more flexible and easily adjustable to unexpected changes.

ERP systems also address the lack of transparency problem, providing all of the entities with necessary information.

A crucial part of SCM is reaching customer and business partner satisfaction by providing a desired product to a specified destination within required timeframe. While the level of technology is rising thus high as we can witness it today, it is becoming even more challenging for enterprises to satisfy their clients and SCM is one of the major tools they can deploy.

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