What Is Supply Chain Management (SCM) ?: Physical Flows

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What is Supply Chain Management (SCM)?

Supply chain management (SCM) is the active management of supply chain
activities to maximize customer value and achieve a sustainable competitive
advantage. It represents a conscious effort by the supply chain firms to develop and
run supply chains in the most effective & efficient ways possible. Supply chain
activities cover everything from product development, sourcing, production, and
logistics, as well as the information systems needed to coordinate these activities.
The concept of Supply Chain Management (SCM) is based on two core ideas:
1. The first is that practically every product that reaches an end user represents
the cumulative effort of multiple organizations. These organizations are
referred to collectively as the supply chain.
2. The second idea is that while supply chains have existed for a long time,
most organizations have only paid attention to what was happening within
their “four walls.” Few businesses understood, much less managed, the
entire chain of activities that ultimately delivered products to the final
customer. The result was disjointed and often ineffective supply chains.
The organizations that make up the supply chain are “linked” together through
physical flows and information flows.
Physical Flows
Physical flows involve the transformation, movement, and storage of goods and
materials. They are the most visible piece of the supply chain. But just as important
are information flows.
Information Flows
Information flows allow the various supply chain partners to coordinate their long-
term plans, and to control the day-to-day flow of goods and materials up and down
the supply chain.
What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and
services and includes all processes that transform raw materials into final
products. It involves the active streamlining of a business's supply-side
activities to maximize customer value and gain a competitive advantage in the
marketplace.
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SCM represents an effort by suppliers to develop and implement supply

chains that are as efficient and economical as possible. Supply chains cover
everything from production to product development to the information systems
needed to direct these undertakings.
How Supply Chain Management Works

Typically, SCM attempts to centrally control or link the production, shipment,
and distribution of a product. By managing the supply chain, companies are
able to cut excess costs and deliver products to the consumer faster. This is
done by keeping tighter control of internal inventories, internal
production, distribution, sales, and the inventories of company vendors.
SCM is based on the idea that nearly every product that comes to market
results from the efforts of various organizations that make up a supply chain.
Although supply chains have existed for ages, most companies have only
recently paid attention to them as a value-add to their operations.
In SCM, the supply chain manager coordinates the logistics of all aspects of

the supply chain which consists of five parts:
 The plan or strategy

 The source (of raw materials or services)
 Manufacturing (focused on productivity and efficiency)
 Delivery and logistics
 The return system (for defective or unwanted products)
The supply chain manager tries to minimize shortages and keep costs down.
The job is not only about logistics and purchasing inventory. According
to Salary.com, supply chain managers, “make recommendations to improve
productivity, quality, and efficiency of operations.”
Improvements in productivity and efficiency go straight to the bottom line of a

company and have a real and lasting impact. Good supply chain management
keeps companies out of the headlines and away from expensive recalls and
lawsuits.
Supply Chains
A supply chain is the connected network of individuals, organizations,
resources, activities, and technologies involved in the manufacture and sale of
a product or service. A supply chain starts with the delivery of raw materials
from a supplier to a manufacturer and ends with the delivery of the finished
product or service to the end consumer.
SCM oversees each touchpoint of a company's product or service, from initial

creation to the final sale. With so many places along the supply chain that can
add value through efficiencies or lose value through increased expenses,
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proper SCM can increase revenues, decrease costs, and impact a

company's bottom line.
Example of SCM
Understanding the importance of SCM to its business, Walgreens Boots
Alliance Inc. placed focused effort on transforming its supply chain in 2016.
The company operates one of the largest pharmacy chains in the United
States and needs to efficiently manage and revise its supply chain so it stays
ahead of the changing trends and continues to add value to its bottom line.
As of July 5, 2016, Walgreens has invested in the technology portion of its

supply chain. It implemented a forward-looking SCM that synthesizes relevant
data and uses analytics to forecast customer purchase behavior, and then it
works its way back up the supply chain to meet that expected demand.
For example, the company can anticipate flu patterns, which allow it to
accurately forecast needed inventory for over-the-counter flu remedies,
creating an efficient supply chain with little waste. Using this SCM, the
company can reduce excess inventory and all of the inventories' associated
costs, such as the cost of warehousing and transportation.
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What is Supply Chain Management (SCM)?

What Is Supply Chain Management (SCM)?

SCM represents an effort by suppliers to develop and implement supply

How Supply Chain Management Works

In SCM, the supply chain manager coordinates the logistics of all aspects of

 The plan or strategy

Improvements in productivity and efficiency go straight to the bottom line of a

SCM oversees each touchpoint of a company's product or service, from initial

proper SCM can increase revenues, decrease costs, and impact a

As of July 5, 2016, Walgreens has invested in the technology portion of its

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