What is Supply Chain Management?

Written By Accounting-Degree.org Staff

Supply chain management encompasses all of the activities needed to manage the flow of a product from its point of origin to its delivery to an end customer. Getting goods from one place to another on schedule, within budget and undamaged is not the only objective of supply chain management. Another key objective of these integrated activities is to create value across the supply chain by streamlining processes, effectively forecasting product demand and using technological advancements appropriately. Here are some of the key functions, processes and challenges of supply chain management within the new global economy.

Major Supply Chain Management Functions

Some of the primary functions performed by supply chain professionals are managing inventory, distribution and suppliers for their goods. These goods also include the raw materials required to generate finished products.

Inventory control is needed to establish how much of a product needs to be acquired and the frequency that orders should be placed. When managers consider this variable, they take into account how much of a product should be stored in their facilities to meet their immediate needs as well as quantity discounts they are likely to receive by purchasing larger quantities of goods.

Distribution management involves establishing product distribution points that allow for the efficient transport of goods. Transportation is also included within this function and supply chain managers consider the types of transport methods that work for various packaged goods so that products arrive undamaged. According to CCJ Innovators, modern distribution centers consider the use of alternative energy sources for their plants and facilities to save money without compromising performance.

In supply chain management, a business is only as good as its strategically selected, supplier partnerships. Agreements with key suppliers ensure that businesses have the raw materials that they need at the right time to produce whatever is needed. When these agreements are negotiated properly, extensive storage space for goods is not necessary, because just in time principles are utilized based on predicted demand.

Key Supply Chain Management Processes

The above mentioned functions require structured processes to be successfully performed, and special attention is paid to procurement, performance measurement and customer care activities. Procurement strategies that are beneficial to all stakeholders must be established. These strategic plans often allow companies to extend their reach into new international markets as smoothly as if they were performing in their home markets. Eliminating performance lag in upstream and downstream supply chain activities not only saves one company time, but it allows all stakeholders to monetarily benefit from increased efficiencies. These efficiencies are best demonstrated by the ability of retailers to put the right products on their shelves at the right frequency to meet end customer demands. This is an element of customer care management, and it involves integrated inventory management systems that automate order placement to suppliers of finished goods. The information gathered from these systems about customer preferences, buying habits and other trend data are used to predict future demand and improve customer service.

Current Supply Chain Management Challenges

Since supply chain activities are complex, every business faces challenges while attempting to successfully execute supply chain management functions. Some of the most common issues within the supply chain management community is reducing demand uncertainty, implementing integrated supply chain systems and inflexible supply chains that are late to adapt product lines to take advantage of market trends.


Many people do not think about the network of activities needed to bring their favorite products to local retail store shelves. Without these activities that comprise supply chain management, consumer goods would likely arrive late, possibly in poor condition and at potentially higher prices to the end customer.