Supply chain management (SCM) involves the movement of products and services from suppliers to distributors. SCM involves the flow of information and products between and among supply chain stages to maximize profitability.
The major functions involved in SCM are the procurement of raw materials, product development, marketing, operations, distribution, finance, and customer services. Customers are an integral part of SCM.
The objective of supply network or SCM is to maximize the overall value. Value is correlated to supply chain profitability. Here, profitability is the difference between the total revenue generated from the customer and the overall supply chain costs.
Strategies and designing of the supply chain include:
- Deciding on the supply chain structure and the activities each stage of the supply chain will perform
- Selecting a location and capacities of facility
- Deciding on the products that are to be made and the location where they need to be stored
- Choosing the modes of transportation and the source from where the information is to be collected
Supply chain design decisions are long term projects and are expensive to reverse; so the manager must take into account the market uncertainty.