SCM stands for Supply Chain Management.

A supply chain, logistics network, or supply network is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.

A typical supply chain begins with the extraction of raw material and includes several production links, for instance; component construction, assembly and merging before moving onto several layers of storage facilities of ever decreasing size and ever more remote geographical locations, and finally reaching the consumer.

Many of the exchanges encountered in the supply chain will therefore be between different companies who will seek to maximize their revenue within their sphere of interest, but may have little or no knowledge or interest in the remaining players in the supply chain.

Supply Chain Management

In the 1980s the term Supply Chain Management (SCM) was developed, to express the need to integrate the key business processes, from end user through original suppliers. Original suppliers being those that provide products, services and information that add value for customers and other stakeholders. The basic idea behind the SCM is that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations, production capabilities.

If all relevant information is accessible to any relevant company, every company in the supply chain has the possibility to and can seek to help optimizing the entire supply chain rather than sub optimize based on a local interest. This will lead to better planned overall production and distribution which can cut costs and give a more attractive final product leading to better sales and better overall results for the companies involved.

Incorporating SCM successfully leads to a new kind of competition on the global market where competition is no longer of the company versus company form but rather takes on a supply chain versus supply chain form.

The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labor. Various aspects of optimizing the supply chain include liaising with suppliers to eliminate bottlenecks; implementing JIT (Just-in-Time) techniques to optimize manufacturing flow; and using location/allocation, vehicle routing analysis, Dynamic programming and, of course, traditional logistics optimization to maximize the efficiency of the distribution side.

There is often confusion over the terms Supply Chain and Logistics. It is now generally accepted that the term Logistics applies to activities within one company/organization whereas the term Supply Chain also encompasses suppliers and customers and therefore is a much broader focus.

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