What is Supply Chain Management and Why is it important?

Supply – chain management can be defined as the design, planning and execution, control and monitoring of supply–chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. Marketing channels play an important role in supply-chain management. It draws heavily from the areas of industrial engineering, systems engineering, operation management, logistics, procurement, information technology, and marketing while surviving for an integrated approach. In commerce, supply- chain management, the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods from the point of origin to the point of consumption.

Supply-chain management, techniques with the aim of coordinating all parts of the supply chain from supplying raw materials to delivering products. The main aim is to minimize total costs with respect to existing conflicts among the chain partners. Example: The interrelation between the sales department desiring to have higher inventory levels to fulfill demands and the warehouse for which lower inventories are desired to reduce holding costs. The main focus is turned to efficiency and added value, or the end user’s perception of value. Efficiency must be increased and bottlenecks must be removed. The measurement of performance focuses on total system efficiency and the equitable monetary reward distribution to those within the supply chain. On the contrary, the supply chain includes the collection of goods after consumer use for recycling.




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Relying on effective supply chains or networks is a must for organizations in the global market and networked economy. According to Peter Drucker, the concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. In recent years globalization, outsourcing and information technology have enabled many re-known organizations to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities. The problem with this is that, with complicated interaction among the players, the network structure neither fits the market nor hierarchy categories. Traditionally companies in a supply network concentrate on the inputs and outputs of the processes, with little focus on the internal management working of other individual players.


Let me explain in simpler words. To increase profitability, companies used to divide the various work steps between their employees. Today owing to the revolution in the concept of labor division, global organizations divide the various tasks in the value chain amongst each other. The sub-products travel long distances. The companies can manufacture more quickly and more cheaply than a single company. This way of integrated planning opens up new markets. But that makes the companies become dependant on each other making a symbiotic relationship amongst them. But these business relationships require closer cooperation and a more intensive exchange of information.


Terms like ‘’Keiretsu”, “Extended Enterprise”, “Virtual Corporation”, Global Production Network” have been coined by the researchers. In general, such a structure can be defined as a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration.

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Concept Of Centroids:



The concept of Centroids is of utmost economic importance in the study of supply-chain management. A centroid is a location that has a high proportion of a country’s population and a high proportion of its manufacturing, generally within 800km. The centroid’s importance is directly proportional to its closeness to the population.



Long Term Goals Of Supply Chain Management:


  • High flexibility.
  • High logistics performance
  • Low logistics costs
  • High economic efficiency and productivity


Advantage Of Supply Chain Management:

The benefits of supply chain management are higher efficiency rates, reduced cost effects, raised output, raised business profit level, boost in cooperation, lowered delay in processes and an enhanced supply chain network.



Disadvantages Of Poor Supply Chain Management:


No matter the supply chain management can be a beneficial system that simplifies the company’s daily operations, a poor supply chain management system can prove to be costly in more ways. For example, changing a supply chain management can prove to be disastrous on the financial investment time and human resources. Improper implementation can lead to wasted labor, service redundancy and missed deadlines. Hence a thorough analysis before the implementation of changes to the supply chain is a must. Also integrating a new system into the work supply chain is complex as it requires restructuring and team member training. This process demands detailed meaning, meaningful communication else it can leash havoc on excessive employee turnover. An experienced provider should start with a clearly defined onboarding or transition process that can be customized to fit unique teams and timelines.

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A company that aims at quality supply chain management should have a thorough knowledge of the advantages and disadvantages that follow. The focus should be on continuous analysis, looking for new ways to reduce the supply chain expenses or improving frequency and effectiveness. The target would be reduced costs allowing each penny invested to be used efficiently and effectively. With effective management, cost reduction, and risk mitigation, the business can gallop ahead in a competitive market and aim higher levels of success.


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