What is Supply Chain Management (SCM)?

Supply chain management (SCM) is the practice of coordinating a business’ product design and production flow from start to finish. While it’s often associated with the logistics of moving goods from point A to point B, its definition is actually much broader. It begins with exploring design space and the sourcing of raw materials, even as early as the materials used for the research and development of a product.

Supply chain management ends when a product enters users’ hands, or even later, by some definitions, at the end of a product’s full lifecycle. Frameworks for supply chain management help interconnected teams collaborate more efficiently, keep their daily tasks aligned with business objectives, and create quality products on schedule.

Supply chain management spans all of a business’s product’s life stages, including market research, initial prototype development and testing, materials sourcing, manufacturing, delivery, and returns. That makes supply chain management an integral component of a product lifecycle management (PLM) strategy.

The history of supply chain management

Early examples of supply chain management include the vast movement of military supplies in the Roman Empire or the safe and quick ferrying of luxury goods across the Silk Road. Just as in today’s supply chains, different teams of people worked together to coordinate all of the materials, labor, and time required to create these items and deliver them to their final destination.

Whether it’s a flood or a global pandemic, supply chain disruptions are inevitable. Supply chain management identifies and addresses these risks and delays, helping businesses to keep going even in unpredictable times. In recent years, new technologies like predictive analytics, the Internet of Things (IoT), and artificial intelligence (AI) have been integrated into supply chain management software, creating an unprecedented ability to anticipate disruptions and move quickly to counteract them.

The importance of supply chain management

SSupply chain management affects much more than customer satisfaction. Its successful execution underpins the entire design and production cycle and, for many businesses, their entire value proposition. When supply chain management succeeds, the whole business does. For instance, supply chain management ensures that raw materials arrive at the production facility on time and in usable condition. Without raw materials, production could grind to a halt, causing needless waste and delays.

Because supply chain disruption is inevitable, supply chain management should also include practices that help prepare for the future, like demand forecasting, which helps companies prioritize production and materials sourcing for high-demand or seasonal items, and risk prediction, anticipating potential delays like a major weather event or geo-political instability.

As part of PLM frameworks, supply chain management coordinates design, manufacturing, and procurement with logistics operations. Supply chain management tools that integrate with PLM solutions like Aras Innovator allow businesses to access comprehensive information about each stage of production and move more nimbly.

Key elements of supply chain management

Because supply chain management is a complex, multifunctional process, it extends across many business functions, all working together in concert.

The Key Elements of Supply Chain Management

Product Design Planning

• Collaborative Planning
• Integrated Information Sharing
• Design for Logistics and Manufacturing
• Cross-Functional Teams

Inventory and Resource Planning

• Assess inventory levels and possible surges in demand to create a production strategy
• Identify any optimizations or process improvement

Sourcing

• Coordinate with procurement and labor sourcing teams
• Gather materials and inspect for quality

Manufacturing

• Assemble raw materials into a finished product

Delivery

• Work with logistics providers to move the product from its place of production to its place of use

Returns

• Offer easy paths forward for customers seeking returns

Common approaches to supply chain management

Different strategies for supply chain management offer different benefits and drawbacks, and some tactics make more sense for a given team than others. Here’s a roundup of the most common approaches to supply chain management:

Design for supply chain (DfSC)

Product design can influence how easily and cost-effectively products can be manufactured, distributed, and delivered. Incorporating supply chain considerations during the design phase ensures that the product is optimized for production, sourcing, and logistics.

Lean supply chain management

In lean supply chain management, supply chain teams focus on delivering maximal value to the customer. Lean supply chain management eliminates any inefficient or unnecessary processes and adheres strictly to those that deliver value. For instance, lean supply chains may abandon practices like overproduction, where excess inventory is produced to cushion against surges in demand.

Agile supply chain management

Agile supply chain management aims to work with, not against, the dynamic forces that affect supply chains, helping organizations stay as nimble and flexible as possible to adapt to changing conditions.

Six Sigma

Six Sigma is a supply chain management methodology that focuses on continuous improvement. It examines how processes are performed so that they can be carried out more efficiently in the future. An empirical strategy, Six Sigma aims to help businesses craft supply chain management strategies around data-driven insights.

Total quality management (TQM)

In total quality management (TQM), all members of an organization are encouraged to contribute to process improvement. TQM aims to create a culture of continuous improvement in every aspect of the workplace, prompting every team member to identify the many business processes they participate in and think of ways to make them more efficient.

Resilient supply chain management

Resilient supply chain management helps organizations become tougher and quicker to recover when unforeseen events strike. In a resilient supply chain, scale may be necessary to have the capacity needed to maintain inventory levels in unpredictable times. Resilient supply chains may also sacrifice some agility for the sake of consistency.

Green supply chain management

Green supply chain management puts environmental efficiencies first, with business efficiencies to follow. It takes into account the total environmental impact of a product, from its origin to its end of life.

Digital supply chain management

Digital supply chain management is becoming increasingly essential for all of the above techniques. With modern technology, digital supply chains can bring together information from many sources in one location, helping leaders make smarter decisions faster.

Supply chain management software

Supply chain management software includes many types of tools built to support the core functions of modern supply chain management, including:

Supplier portals

Provide a structured platform for sharing design requirements, receiving proposals, and managing revisions collaboratively.

Inventory management software

Businesses need to be able to reference their inventory to determine whether to produce more of something. Inventory management software automatically monitors inventory, helping provide an immediate and accurate answer.

Order management systems (OMS)

Order management systems (OMS) allow businesses to receive, catalog, and track an order’s progress. They play an essential role in supply chain management by allowing customers and businesses to check in on the status of individual orders.

Warehouse management systems (WMS)

Warehouse management systems (WMS) help businesses optimize their use of space and time in their warehouses. This optimization can be extremely fine-tuned, moving different items that are often packed together into complementary areas and even planning routes for packing teams

Transportation management systems (TMS)

In a transportation management system (TMS), supply chain management leaders can view and update all logistics operations, from. monitoring a business’s fleet of delivery trucks to asking for bids for new carriers.

Demand planning software

Demand planning software helps businesses anticipate seasonal demand, reflect on past demand trends, and prepare for unforeseen spikes.

Supplier relationship management (SRM) software

Supplier relationship management software (SRM) helps businesses keep track of all vendors that provide the goods and services they need to operate. In certain sectors, SRMs are essential tools that help build a solid rapport with suppliers.

Enterprise resource planning (ERP) systems

Enterprise resource planning (ERP) systems support enterprise-wide resource allocation planning, including within the supply chain and beyond. Unlike supply chain management software, ERP systems can include other business functions like accounting and marketing.

Supply chain analytics software

Using supply chain analytics software, businesses track supply chain performance against chosen metrics. The supply chain analytics tool should surface key trends and proactively identify opportunities for improvement.

Supply chain visibility software

Supply chain visibility software connects supply chain management professionals with the information they need about every aspect of their logistics operation, often in real-time. With greater visibility into information, businesses can make more informed decisions and identify inefficiencies.

Supply chain management and Industry 5.0

Supply chain management will prove essential to building Industry 5.0. To make the performance improvements needed to realize this futuristic vision of industry, businesses will need to double down on supply chain management practices and stay up to date with the latest best practices. In particular, the following technologies have a big role to play:

Supply chain management and AI

AI will help supply chain management teams make better decisions with their data. Large data models will predict future trends more powerfully than ever before, while generative AI chatbots could help team members access deep analysis through conversational questions, making data-driven insights easier to use.

Supply chain management and IoT

The Internet of Things (IoT) is exactly what it sounds like: integrating wireless connectivity into all kinds of objects. In supply chain management, IoT technology will allow teams to instantly access up-to-date information about many points of the supply chain, from the weather to the factory floor to the location of an individual shipment.

Supply chain management and automation

Automation handles processes like inventory management, order management, and more, minimizing busy work and helping supply chain management teams focus on making better decisions and improving processes.

To learn more, check out our
eBook Engineering to Possible:
The Importance of Systems Thinking and Product Variability in Supply Chain Strategies.

Aras capabilities in supply chain management

Through Supplier Management Solutions, Aras Innovator® provides an ideal platform for supply chain management that includes:

Supplier management software to assess, select, and improve supplier quality and risk

Helping maintain a great rapport with suppliers, supplier management capabilities let you track and improve supplier relationships and performance.

Systems to extend processes and workflows to your network

Sharing processes and workflows with collaborators fosters better communication and trust.

Coordinate and enable traceable, bidirectional information exchange

With bidirectional information exchange, trusted suppliers can view and share information instantly to keep everyone on the same page.

Getting started with supply chain management

If you’re ready to integrate supply chain management into your PLM processes, consider which tools suit your needs. In Aras Innovator, flexible and open transfer of information helps your team and suppliers take full advantage of the digital thread.