With the Gartner IT Infrastructure & Operations Management Summit coming up in Frankfurt between 5-6 June perhaps this is a good moment to look at some operational definitions. We very often use terminology without necessarily being sure that we’re all talking about the same things.
So let’s start with a definition of Supply Chain Management!
If you consider the new pump that is being assembled in your workshop in Europe, you may find out that most minor components were manufactured in countries miles away from you. They were possibly distributed by a company located in the Americas and shipped directly from an Asian factory.
Global markets are expanding beyond borders and re-defining the way demand and supplies are managed. Global companies are driven by markets across continents. To keep the cost of manufacturing down, they are forced to keep looking to set up production centres where the cost of raw materials and labour is cheap. Sourcing of raw materials and vendors to supply the right quality, quantity and at right price calls for dynamic procurement strategy across countries and continents.
In the above context you find companies procuring materials globally from various vendors to supply raw materials to their factories situated in different continents. The finished goods coming out of these different factory locations then pass through various chains of distribution network involving warehouses, exports to different countries or local markets, distributors, retailers and finally to the end customer.
In simple language, managing all of the above activities together as a whole to manage demand and supply on a global scale is Supply Chain Management. As per definition SCM is the management of a network of all business processes and activities involving procurement of raw materials, manufacturing and distribution management of Finished Goods. SCM is also called the art of management of providing the Right Product, At the Right Time, Right Place and at the Right Cost to the Customer.
I hope that’s all clear! In our next piece we’ll have a look at why SCM strategy is so important for organisations.