What Is Supply Chain Management, and Why Is It Important?

In today’s global business environment, the end-to-end process of turning raw materials into finished products in the hands of end users is complex and challenging. Businesses need skilled professionals to manage the flow of materials and goods between organizations at every phase of this process, which is known as the supply chain. But what exactly is supply chain management, and why is it important?

A well-managed supply chain is central to many businesses’ core goals of generating revenue and maximizing customer satisfaction. Supply chain management professionals juggle several responsibilities that involve everything from sourcing and production to logistics and information technology. Their expertise is crucial to companies’ efforts to manage risk and minimize costs.

Individuals interested in a career in supply chain management can begin by earning a relevant bachelor’s degree. These programs train students to meet the demands of the job, gain a solid understanding of how the supply chain system works and develop leadership skills.

Supply Chain Management Definition

Supply chain management entails monitoring the movement of materials and goods at every phase of the production and delivery of a product. Supply chain management involves planning, sourcing, manufacturing, logistics and managing returns. Essentially, it’s a coordinated effort to make sure that all the materials and goods arrive when and where they’re supposed to. Supply chain managers work with internal and external parties to facilitate the many steps in this process. Their goal is to minimize errors, costs and delays.

How Does Supply Chain Management Work?

No matter how big or small the product, a supply chain is likely involved in creating and delivering it to the end user. The supply chain process typically unfolds in these phases:

1. Planning

In the planning phase, managers rely on the forecasted demand for a product to decide on the amount of materials that will need to be purchased, stored and shipped. By using accurate predictions, managers can make more precise orders to eliminate waste. These forecasting metrics are one of the keys to determining the most efficient way to produce the product.

2. Sourcing

Sourcing refers to the selection of suppliers for needed raw materials or components. Supply chain managers often place orders, oversee the receipt of items, manage inventory and sign off on supplier payments. They need to establish strong relationships with dependable, experienced and professional vendors to meet their manufacturing needs.

This step is especially crucial when delivering perishable goods, during natural disasters or when faced with other emergencies. Effective sourcing can lead to quality materials and competitive prices.

3. Manufacturing

The manufacturing phase involves transforming raw materials into finished goods, including assembling, inspecting, testing and packaging the final product. Depending on the product, these tasks may all be done in one place, or product components may need to be transported from one manufacturer to another. Supply chain managers manage all of these movements, along with evaluating costs and efficiency standards.

4. Delivery

When a product is ready and sales are finalized, it’s time for delivery. This phase involves the transport of finished products to customers. Customers can either be retailers or end users. Supply chain managers oversee the various delivery channels that are used to fulfill orders on time and at a low cost.

5. Returns

The final stage in the supply chain management process includes customer returns, recalls, exchanges and recycling. This phase involves what is sometimes called reverse logistics, as it requires performing some of the original tasks in reverse.

Why Is Supply Chain Management Important?

With an understanding of what supply chain management is, let’s break down why it is important. A well-managed supply chain can reduce operating costs for businesses, lower the risk of product recalls, improve customer satisfaction, control shipping inefficiencies and minimize production waste.

Streamlining the process can also help a business increase profits, improve its place in the market over its competitors and more seamlessly adhere to legal requirements and standards.

Supply chain management is a rewarding career choice. While supply chain talent shortages are cyclical, the good news is that supply chain manager is just one of a handful of rewarding supply chain management careers. Businesses often are in need of professionals with expertise in logistics, procurement or administration.

Earn a Bachelor’s Degree to Gain the Skills to Work in Supply Chain Management

Succeeding in supply chain management requires strong leadership, problem-solving, analytical and communication skills. These professionals typically need a foundation in transportation, customer service, economics and administration management.

To help those who aspire to work in supply chain management get started in the field, App State Online offers a Bachelor of Science in Business Administration (BSBA) in Supply Chain Management program through Walker College of Business, which holds AACSB accreditation. Students gain an understanding of the role of technology in the supply chain process, along with how to source suppliers, manage costs, handle import-export issues and apply performance measurements. Students can choose from multiple eight-week term start dates and enjoy transfer-friendly policies.

Find out how App State Online can prepare you for a career in supply chain management.

Recommended Readings

What Is a Logistics Coordinator?

Sustainable Practices That Support the Global Supply Chain

Why AACSB Accreditation Matters When Choosing a Business Program

Sources:

Association for Supply Chain Management, “What Is Supply Chain Management?”

Council of Supply Chain Management Professionals, The Importance of Supply Chain Management

Hollingsworth, “15 Interesting Facts About Supply Chain Management and Logistics”

IBM, “What Is Supply Chain Management?”

Indeed, “What Is Supply Chain Management and Why Is It Important?”

Investopedia, “Supply Chain Management (SCM): How It Works and Why It’s Important”