Supply chain management is the handling of the entire production flow of a good or service — starting from the raw components all the way to delivering the final product to the consumer. To accomplish this task, a company will create a network of suppliers (the “links” in the chain) that move the product along from the suppliers of raw materials to the organizations who deal directly with users.
According to CIO, there are six components of traditional supply chain management:
Planning – Plan and manage all resources required to meet customer demand for a company’s product or service. When the supply chain is established, determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers and meets company goals.
Sourcing – Choose suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. Key processes include ordering, receiving, managing inventory and authorizing supplier payments.
Making – Organize the activities required to accept raw materials, manufacture the product, test for quality, package for shipping and schedule for delivery.
Delivering (or logistics) – Coordinating customer orders, scheduling delivery, dispatching loads, invoicing customers and receiving payments.
Returning – Create a network or process to take back defective, excess or unwanted products.
Enabling – Establish support processes to monitor information throughout the supply chain and assure compliance with all regulations. Enabling processes include: finance, human resources, IT, facilities management, portfolio management, product design, sales and quality assurance.