Supply Chain Management definition
The process of analysing and optimising the structure of companies that provide your company with goods and services, often raw materials.
Supply chain management may address specific problems within the supply chain such as:
- Lack of redundancy: if a business relies too much on one supplier, they can run into trouble if that supplier goes bust or struggles to fulfil an order
- Inventory problems: existing arrangements may cause a bottleneck of inventory at a specific part of the product lifecycle. Companies may wish to find additional suppliers who can provide goods on alternate terms
As the world becomes increasingly globalised and businesses seek to enter new territories, the strength and durability of supply chains becomes extremely important. According to M. Eric Johnson (1996), companies that previously handled all aspects of production in-house are being forced to spread operations across continents or outsource operations, which require greater oversight and attention to the supply chain.
Attention from charities and pressure groups on ethics and transparency in the supply chain is also encouraging companies to spend more time ensuring their supply chain fits in with a sustainable business model.
According to M. Eric Johnson (1996), companies have also had to deal with implementing new technologies that allow greater supply chain integration, such as radio frequency identification (RFID).
Also see supplier diversity.