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What Is Supply Chain Management?

The primary goal of many businesses in all industries is to increase the visibility of their products to consumers. But how exactly is that done? Supply chain management (SCM) encompasses all the processes of getting the right product to the right consumer. There are many different managerial roles in this industry that oversee planning, purchasing, assembly, moving, storage, distribution, sales, and customer service. Careful attention to these elements results in completed products and satisfied customers. Without supply chain management, businesses wouldn’t be able to function.

It’s important for business students to have a solid command of SCM processes and how they impact products and customers. Every business that supplies goods requires SCM professionals, so it is extremely vital to understand how it works and interacts with the rest of the business processes. SCM software, such as Enterprise Resource Planning (ERP) or Supplier Relationship Management (SRM) systems, may help organizations with that procurement by working to optimize processes, ensuring that manufacturing and inventory are all lined up correctly and keeping the logistics straight. Moreover, blockchain can automate various supply chain processes through the use of smart contracts, which are self-executing agreements that automatically trigger actions when predefined conditions are met. These are just a couple of ways SCM professionals leverage tools and technology to create better supply chains. Learn more about supply chain management and how it is essential to profitable retail companies.  

How Does SCM Work?

SCM is focused on managing the lifecycle of product production, shipment, and distribution. Most companies manage the supply chain themselves instead of relying on vendors or suppliers because it allows them to keep costs low and get products to consumers faster. They have better control over internal inventories, production, distribution, sales, and more when they run the supply chain logistics themselves. They are able to optimize procurement, transportation, manufacturing, inventory, and all the logistics when SCM lies in their hands.

Various organizations make up the supply chain, but in the past, American retailers haven’t paid very close attention to how their products are made and stored. SCM logistics has largely been left to the suppliers, and the supply chain has often taken advantage of organizations when they haven't been directly involved in the logistics of product production. This has ended up being costly, so organizations now are working harder to understand supply chain management and processes to add value to their operations.

A supply chain manager oversees the logistics of creating and distributing products in retail industries. This is a highly analytical, data-driven role that touches every part of the supply chain process, from working with suppliers and creators to communicating with distributors and customers.

5 Elements of Supply Chain Management

In the world of retail, it's crucial to understand how products are made, stored, and distributed to consumers. This process, known as the supply chain, involves a number of different steps that must be carefully managed in order to ensure a successful outcome. So, what exactly is the supply chain? It’s the process a product follows in its lifecycle, from creation to distribution. The supply chain consists of five crucial elements: 

  1. Plan
  2. Raw materials or services
  3. Manufacturing
  4. Delivery
  5. A return system for unwanted or damaged products


The first step in the SCM process is planning: developing a comprehensive strategy for how a product will be made, stored, and distributed to customers. This strategy should consider factors such as market demand, production capacity, and logistics. Organizations also develop contingency plans to account for unexpected events such as supply chain disruptions or changes in consumer preferences.

 Key planning actions for organizations might include:

  • Conducting market research to determine customer demand
  • Developing production scheduling and timelines
  • Identifying potential suppliers and vendors
  • Allocating resources and setting budgets
  • Developing risk management plans

Raw Materials or Services

The second element of supply chain management is raw materials or services. This consists of identifying the materials and services that are needed to make a product and working with suppliers and vendors to acquire them. Organizations must ensure that the raw materials and services they receive meet legal and quality standards and are delivered on time.

Key actions in this phase might include:

  • Identifying suppliers and vendors
  • Negotiating contracts and pricing
  • Tracking inventory levels
  • Monitoring supplier performance and quality
  • Developing contingency plans in case of supply chain disruptions


The third element of supply chain management, manufacturing, is the actual creation of a product. This includes assembly, quality control, and packaging. Organizations must ensure that the manufacturing process is efficient and that products meet quality standards.

Key actions in this phase might include:

  • Developing production schedules
  • Conducting quality control checks
  • Ensuring compliance with regulatory standards
  • Monitoring production output and efficiency
  • Developing contingency plans in case of production disruptions


The fourth element of supply chain management is delivery. This involves getting the finished product to the customer in a timely and efficient manner. Successful organizations have efficient delivery processes optimized to minimize costs and maximize customer satisfaction.

Key actions in this phase might include:

  • Developing delivery schedules and routes
  • Managing transportation logistics
  • Tracking shipments and deliveries
  • Ensuring compliance with regulatory standards
  • Developing contingency plans in case of delivery disruptions 

A Return System

The final element of supply chain management is the return system, which consists of managing the return of unwanted or damaged products. This is an essential element in ensuring that customers receive prompt refunds or replacements. The return processes should be as easy and efficient as possible to ensure that customers are satisfied with the outcome.

Key actions in this phase might include: 

  • Developing clear return policies and procedures
  • Providing customer service support for returns 
  • Conducting quality control checks on returned products
  • Managing inventory levels of returned products 
  • Developing contingency plans in case of return disruptions

SCM Flows

In addition to the five elements of supply chain management, there are also two key types of flow that are involved in the process: physical flows and information flows. 

Physical Flows

In SCM, there is a physical flow of materials and goods from vendors to the company. This can involve the raw materials needed to make a product, the product itself once it has been completed, storing the product, packaging the product, and distributing the product to consumers.  

Information Flows

In SCM, there is also a flow of information that involves communicating long-term plans to vendors, company executives, and customers. If a new product is coming out, there must be clear communication between the supply chain manager and all the vendors and distributors who will be involved. Information flows are also vital for smooth order fulfillment, and for the control of the day-to-day needs of the company via the supply chain.

Supply Chain Models

Organizations have a variety of different supply chain models to choose from to guide their processes. These models assist organizations in tailoring their supply chain processes to their specific needs and goals, leading to the optimization of their operations, cost reduction, and improvement in customer experience.

There are six primary supply chain models that companies can adopt:

Continuous Flow Model

The continuous flow model is characterized by a highly efficient and streamlined supply chain, designed to maximize productivity and minimize waste. This model is often used in industries that require high-volume production, such as consumer goods or automotive manufacturing. The continuous flow model aims to minimize the amount of time and resources spent on each stage of the supply chain, from procurement to delivery, while maintaining high levels of quality and consistency.

Agile Model

The agile model is characterized by a flexible and adaptable supply chain, with a focus on responsiveness and rapid adaptation to changes in demand or supply. This model is often used in industries that are subject to frequent disruptions, such as technology or fashion. The agile model aims to minimize lead times and optimize inventory levels while ensuring that the organization can quickly respond to changes in the market or supply chain.

Fast Model

The fast model is focused on speed and responsiveness, with the goal of delivering products to customers as quickly as possible. This model is often used in industries where speed is critical, such as e-commerce or food delivery. The fast model aims to minimize delivery times and maximize customer satisfaction, while maintaining high levels of quality and consistency.

Efficient Model

The efficient model is characterized by cost efficiency and optimization, designed to reduce waste and maximize productivity. This model is often used in industries where margins are tight, such as manufacturing or logistics. The efficient model aims to minimize costs and optimize resources while maintaining high levels of quality and consistency.

Flexible Model

The flexible model is designed for adaptability and customization, aiming to tailor supply chain processes to meet customer needs. This model is often used in industries where customization is important, such as aerospace or healthcare. The flexible model aims to optimize supply chain processes to meet the unique needs of different products or customers, while maintaining high levels of quality and consistency.

Custom Model

The custom model focuses on creating supply chain processes that meet the specific needs and goals of the organization. This model is often used in industries where supply chain processes are highly complex or specialized, such as pharmaceuticals or aerospace. The custom model aims to optimize supply chain processes to meet the unique needs of the organization while maintaining high levels of quality and consistency. 

SCM vs. Supply Chains

Supply chain management involves optimizing and managing the end-to-end process that a product follows from creation to distribution, while a supply chain refers to the process itself. Proper SCM can increase revenues and decrease costs by managing supplier relationships, inventory levels, transportation, and logistics. It helps ensure that the right products are available to customers at the right time, and by implementing effective SCM, organizations can gain a competitive advantage and achieve better business results.

Supply Chain Professional Management Roles

There are several roles involved in supply chain management, including:

  • Supply chain manager: Responsible for overseeing the entire supply chain process, including planning, procurement, production, and logistics.
  • Materials manager: Responsible for managing inventory levels and ensuring that raw materials are available for production.
  • Logistics manager: Responsible for managing the transportation and distribution of goods. 
  • Purchasing manager: Responsible for negotiating contracts with suppliers and vendors and ensuring that goods are purchased at the best possible prices.
  • Operations manager: Responsible for overseeing the day-to-day operations of the supply chain process.

The main responsibilities of these roles can include: 

  • Developing and implementing supply chain strategies to optimize operations.
  • Monitoring inventory levels and ensuring that materials and goods are available when needed.
  • Managing relationships with suppliers and vendors.
  • Analyzing supply chain data to identify areas for improvement.
  • Ensuring that all supply chain processes comply with relevant regulations and standards.
  • Logistics management and overseeing the movement and distribution of goods.

Skills and knowledge requirements for these roles can vary, but typically include a degree in business or a related field, as well as experience in supply chain management, logistics, or operations. Additionally, skills such as problem-solving, communication, and leadership are highly valued in these roles.

Supply Chain Management Examples

Walmart is a classic example of good supply chain management. Walmart thrives because it has fewer links in the supply chain and buys many products directly from manufacturers rather than from suppliers with markups. They hold potential suppliers to high standards, only picking those that can keep up with their production and quantity needs. They also have regulations about manufacturers storing products in their own warehouses, eliminating transportation and storage needs and costs. 

Amazon is another great example of effective supply chain management. Amazon has turned into the online “big box store” example and thrives off its supply chain strategy. Anyone can sell using Amazon, and they are able to routinely underbid suppliers. Distribution centers group items together, and the ability to store and ship items from the same location aids faster delivery and lower costs. 

Finally, Coca-Cola is another example of streamlined SCM. The organization is able to distribute products all around the globe thanks to efficient processes that are standardized to meet quality requirements. They are focused on customers and ensuring that they have a competitive advantage in the marketplace due to their quality management and global supply.

Supply Chain Management for Small Businesses

If your end goal is to become an entrepreneur and start your own small business, setting up an effective supply chain is an essential step in ensuring the smooth flow of products from suppliers to your customers. To establish a successful supply chain, follow these steps:

  1. Identify the key components: Define the critical elements of your supply chain, such as raw materials, suppliers, transportation, warehousing, and distribution channels.
  2. Select reliable suppliers: Find the right supplier partners for your small business. Research and evaluate potential suppliers and consider important factors such as price, quality, reliability, and delivery times.
  3. Optimize inventory management: Efficient inventory management is important for small businesses to prevent stockouts and reduce carrying costs. Create an inventory control system that tracks stock levels, reordering points, and lead times.
  4. Streamline logistics and transportation: Coordinate transportation and logistics to ensure that products are delivered to customers on time. You should partner with experienced logistics providers and consider using a mix of transportation methods, such as ground, air, or sea, depending on the nature of your products and the location of your customers. Having a variety of delivery options also allows you to keep costs low.
  5. Invest in technology: Implement supply chain management software that can help you manage and optimize your processes. Technology can automate inventory control, order management, supplier management, and transportation logistics, saving you time.
  6. Monitor and measure performance: Constantly track key performance indicators (KPIs) such as order fulfillment rates, inventory turnover, and supplier performance.
  7. Plan for contingencies: Develop contingency plans to troubleshoot potential supply chain disruptions, such as natural disasters, supplier issues, or transportation delays.

As a future small business owner, you should focus on building a supply chain that supports business growth and cultivates customer satisfaction. Remember to review and adjust your supply chain strategy regularly to adapt to changing market conditions and business needs.

Why Is Supply Chain Management Important?

Supply chain management is a key element of successful businesses, in every industry. From IT to healthcare, organizations routinely need supply chain management to effectively sell their products.  

Supply chain management can be a financial drain on a company if not executed properly. SCM professionals find the most cost-effective and efficient ways to create, store, and distribute products, helping save the company money directly.

Fast and timely delivery of quality products is crucial for customer satisfaction. Supply chain management professionals can identify problems with products or processes that could hinder the customer experience or the sale of products themselves, proactively securing a brand’s reputation for quality and availability. SCM software can identify more efficient ways to create a product, inventory issues, quality control problems, and more.  

Consider earning a bachelor’s degree in Online Supply Chain and Operations Management from WGU. Designed with input from industry experts, this fully online bachelor's degree program sets you up with a solid foundation to execute on the most sought-after skills:

  • Data analysis, using SQL and R/R Markdown
  • Data visualization
  • Business analytics
  • Quality assurance
  • Budgeting and trend analysis
  • Project management

Through this accredited degree program, you can obtain reputable third-party professional certifications and qualifications as you study. Upon completing your bachelor's degree in supply chain and operations management, you’ll be equipped to work for a variety of employers, encompassing sectors such as manufacturing, engineering, and beyond!

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