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What Is Supply Chain Management?

Companies in the manufacturing industry are familiar with the supply chain. Here, the raw materials are collected, and then processed to create the product. However, to ensure a good profit, the supply chain must be properly monitored, and the system perfected to minimize loss and error, maximize quality, and deliver efficiently. That is the goal of “supply chain management” (SCM).

Supply chain management usually involves five steps: plan, develop, make, deliver, return.

The “plan” is the management’s strategy which includes an understanding of the customers needs, and how a product or service will meet them. It should also factor in the costs of creating that product or service, and balancing the costs in order to render a profit.

Once that plan is put into place, the next step is to “develop”—specifically, to create that network of suppliers and other “partners” in shipping the product, delivering the service, or collecting payment.

Once those elements are finalized the company must then “make” the product or service. This includes testing it for quality, and choosing the right packaging. This step is crucial because any inferior products will hurt the company’s reputation and ultimately turn away customers.

Of course, it is not enough to make the product; it must be put out into the market. This is the “deliver” stage and can include logistical concerns (how do we ship it to the other side of the country?) as well as appropriate collection of payments.

“Return” on the other hand is the company’s interaction with the customer, including a system for accepting and replacing defective goods, or collecting feedback or addressing questions.

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