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Supply Chain Management Definition

Supply chain management (SCM) is the coordination and integration of the flow of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer both within and among companies.

Everything needed by an organization from business to IT needs is procured from suppliers and the need to manage supplier relations, information, contracts and more grows rapidly while the need to follow regulations persists. This is where organizations need an SCM system to establish streamlined supply chain management processes in order to realize the very best value from their spending through supplier analysis of cost, risk and performance. They need a SCM system to realize a 360-degree visibility into their supplier ecosystem.

Supply chain management flows can be divided into three main flows:

  1. The product flow that includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs

  2. The information flow that involves transmitting orders and updating the status of delivery

  3. The financial flow that consists of credit terms, payment schedules, and consignment and title ownership arrangements​

An effective SCM system helps:

  • Manage contractual obligations

  • Strengthen supplier relations

  • Enterprise spending, Manage risk and compliance to relevant regulations

  • Establish a single comprehensive supplier view and derive insightful procurement analytics.

There are two main types of SCM software: Planning applications and Execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

Though Supply chain Management (SCM) is critical to a company’s procurement to production lifecycle, it is not highly publicized. But with the advent of cloud computing, big data and more, the need for a SCM system is becoming more prominent. Examples of SCM software are InfoPlus, WISE by Royal 4 Systems, 3PL Warehouse Manager by 3PL Central, Infor Supply Chain Management, Oracle SCM Cloud and more.

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