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Supply Chain Management Definition

Updated on December 18, 2012
Knowing a good supply chain management definition can help a business operate more efficiently and profitably.
Knowing a good supply chain management definition can help a business operate more efficiently and profitably.

Supply Chain Management Definition

A supply chain management definition is the process of overseeing incoming physical products vital to a business's operations. Historically, arriving at a supply chain management definition was related to manufacturing and its need for raw materials to produce goods. In recent times it has been used to refer to any products needed for business operations.

The reason for a supply chain management definition change, or broadening of the term, is that computer management has made possible the managing of the quantity of all goods needed in business. The first beneficiary of this was retail. Retail chains realized that computer automation could cut down on the amount of time that stockpiles spent in a warehouse and over purchasing was reduced by keeping real-time inventories or accurately predicting store needs. This greatly reduced the amount of capital tied up in inventory at any one point. This also impacted the costs of warehousing also.

As suppliers and manufacturers started realizing what retailers were doing, they began to adopt the same practices of ordering raw materials that were needed when they were needed. Again alleviating capital tied up in stockpiles and inventory. Eventually, this practice was delegated to every aspect of business. Supply chain management was also propelled by the advent of the Internet, which made cross-communications and instant ordering possible. Other feeder industries also helped like low-cost or overnight delivery services (UPS or FedEx).

Standard everyday items no longer needed to be stockpiled like office supplies, but smaller amounts can be kept on hand. Many office supply companies offer free shipping and can provide overnight service, that makes instant ordering possible. Another example is promotional products for marketing. Previously a company would have to order huge amounts of products like t-shirts, caps, coffee cups, and warehouse them somewhere until needed. Now, many promotional product companies allow corporate clients to order what is needed, when it is needed.

The supply chain management definition has also developed other terms like Just In Time (JIT) supply chain management. That is to say that a company tries to stock nothing ahead of time and its supplier(s) will provide what is needed just in time for production or shipping. There are a lot of variables for a good supply chain management like the trustworthiness of suppliers, reliability of shippers, and planning contingencies for worse case scenarios. Still, business are still trying to figure how much they need to inventory and how much can be ordered as needed.

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Supply Chain Management Comments

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    • Softworx profile image

      Enterprise Software Solutions 3 years ago from South Africa

      Thank you for this hub page on supply chain management.

    • FreightForwarding profile image

      FreightForwarding 6 years ago

      Very informative post on supply chain management. You have clearly explained the processes involved in supply chain. Even I searched on internet, I didn’t get more information on SCM. Thanks and keep posting!

    • profile image

      iso 9000 6 years ago

      Very good post, I was really searching for this topic, as I wanted this topic to understand completely and it is also very rare in internet, that is why it was very difficult to understand.

      iso 9000

    • varun2145 profile image

      varun2145 7 years ago from India

      SCM and Logistics is a very interesting field all-together. Only thing that deters students from entering this field is the remuneration and growth prospects.

    • profile image

      Bridget Davidson 7 years ago

      Great explanation of supply chain! Hopefully this will get more students interested in this field. We currently have a lot of job openings for logistics jobs.