Definition
SCM stands for Supply Chain Management. It is the coordination and optimisation of the flow of goods, services, information, and finances from raw materials to final delivery to customers. SCM covers planning, sourcing, production, logistics, and distribution, ensuring efficiency, cost-effectiveness, and customer satisfaction.
For example, a retailer uses SCM to manage supplier relationships, track inventory levels, and coordinate deliveries to stores across different regions.
Advanced
Modern SCM integrates advanced technologies such as AI, IoT, blockchain, and predictive analytics to improve visibility and decision-making. Cloud-based SCM platforms allow real-time monitoring of shipments, demand forecasting, and collaboration with suppliers worldwide.
Advanced practices include just-in-time inventory, multi-tier supplier management, and sustainable sourcing strategies. SCM also involves risk management for disruptions such as supply shortages, geopolitical issues, or natural disasters. Companies with global operations use SCM to balance efficiency with compliance to trade regulations and environmental standards.
Why it matters
- Improves efficiency and reduces operational costs.
- Enhances customer satisfaction through timely delivery.
- Provides visibility across suppliers, logistics, and demand.
- Supports business resilience during supply chain disruptions.
Use cases
- Tracking shipments in real time with IoT sensors.
- Using predictive analytics for demand forecasting.
- Automating supplier onboarding and contract management.
- Implementing sustainable sourcing for ESG compliance.
Metrics
- Order fulfilment cycle time.
- Inventory turnover ratio.
- Supplier on-time delivery performance.
- Total supply chain cost as a percentage of sales.
Issues
- Vulnerability to global disruptions and shortages.
- High complexity in managing multiple suppliers and regions.
- Compliance challenges with international trade laws.
- Environmental and ethical concerns in sourcing practices.
Example
An electronics manufacturer implements an SCM platform to monitor suppliers and logistics partners. By using predictive analytics, the company reduces delays in component deliveries and improves on-time product launches.