Supply chain refers to the network of organizations linked by movement of goods through various stages of production, storage and delivery until it becomes available to the final consumer.
Supply chain management (SCM) is a step by step integrated and coordinated process of movement of goods from raw materials stage all the way to the final product which is distributed to the final customer.
Supply chain management consists of three main flows which are product flows, financial flows and information flows. Product flow refers to the flow of products through the supply chain process. For example, products can move from raw material form to manufacturer to wholesaler to retailer and eventually to the final consumer. Financial flow refers to financial matters concerning purchasing and sale of products such as credit terms and payment schedules. Information flow refers to flow of information with regards to purchase and sale of products which move throughout the supply chain management process.
Within the strategic management process (SCM), management decision making and activities are usually grouped into strategic, tactical, and operational levels.
Strategic level – At the strategic level, a “big picture,” high level and long-term decisions with regards to supply chain management (SCM) are made in relation to the organization as a whole. Such decisions may include allocation of resources, consideration of partnerships and consideration of product life cycle (PLS) management.
Tactical level – At the tactical level, medium-term decisions are made on the subject of supply chain management (SCM) of the business. Such decisions may be on matters with regards to inventory, production and transportation.
Operational level – At the operational level, day-to-day short-term decisions are made with regards to supply chain management (SCM) of the enterprise. Operational level decisions may concern matters such as daily delivery and production.
The distinction between tactical and operational level decisions is often vague within organizations. This occurs because to meet daily orders (which occur at an operational level) organizations need to allocate resources (which occurs at the tactical level). Therefore, as with any other framework, various levels of decision making provide guidance for effective supply chain management (SMC) which should be supplemented with common sense and intuitive guidance.
There are numerous supply chain management software available, which significantly simplify supply chain management within organizations. Furthermore, the Internet has made communication within supply chain much more easier and faster compared to pre-Internet times.
Effective supply chain management (SCM) can decrease costs associated with supply management activities such as transportation, storage and packaging costs. This can contribute to obtaining a competitive advantage over peers.