Supply Chain Management

Many organizations must deal with the complex task of managing their supply chains. At its simplest, a supply chain is the linkage between an organization’s suppliers, its manufacturing facilities, and the distributors of its products. Each link in the chain has a multiplying effect on the complexity of the process: if there are two suppliers, one manufacturing facility, and two distributors, for example, then there are 2 x 1 x 2 = 4 links to handle. However, if you add two more suppliers, another manufacturing facility, and two more distributors, then you have 4 x 2 x 4 = 32 links to manage.

A supply chain management (SCM) system manages the interconnection between these links, as well as the inventory of the products in their various stages of development. A full definition of a supply chain management system is provided by the Association for Operations Management: “The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.”2 Most ERP systems include a supply chain management module.

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