Supply Chain Management (SCM) is the management of materials, information, and finances processes form supplier to manufacturer to customer. Some supply chains are very simple and some are complicated. The complexity of the SCM is depending on the size of the company and numbers of items that are manufactured.
Supply chain management involves coordinating and integrating product flow, information flow and finance flow within and among companies. The main purpose of it is to reduce inventory and reduce process time of supply.
Customer starts the chain of cycle when they make a decision to purchase a product from a company. After placing the order by customer, planning department will create a production plan to produce the ordered products. To execute production plan, company will have to purchase the raw materials needed. Purchase department receives an indent of raw materials required by the production department to complete the orders. Purchase department sends purchase orders to selected vendors to deliver the desired raw materials to the manufacturing site on or before the required date. After that raw materials are received from the vendors, checked for necessary quality and moved into the warehouse. After QC (Quality Check) manufacturer will ask for replacement if any defect is found in raw materials.
Supplier will then send replacement if required, and also send an invoice to the company for the delivered items. Raw materials are stored in inventory until they are required by the production department. Production department send requisition to inventory as per production plan, the raw materials are moved from inventory to the production area. After finishing the production, products are stored in inventory to deliver the customer.
When the finished product arrives in the inventory, the dispatch department determines the most efficient method to dispatch the products to customer. When the products are received by the customer, the company will send an invoice for the delivered products.
Above processes are called a complete supply chain and to manage these process called SCM. This can be managed by supply chain management software also.