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What is Supply Chain Management and Why is it Important

Updated: Sep 24, 2022

Welcome to Supply Chain Hub's first post. I guess it would be appropriate to introduce to topic of supply chain management before we go into the specific aspects of it.

It is impossible for one business to make everything. Most businesses focus on producing one or a few things they are good at and acquire other inputs required to complete their product. Business people will often refer to these specializations as the company’s core competencies. Our economy is made up of many different businesses working together doing what they are good at (or supposed to be good at) to create products and services that consumers demand. The goal of supply chain management (SCM) is to effectively and efficiently move goods and services through the economy.

Here is an example of a typical supply chain:

Raw Materials --> Manufacturing --> Assembly --> Distribution --> Retail --> End user

Note that there are likely multiple organizations in each step above in order to bring one final product to market. Also, some organizations may take ownership of two or more steps of the supply chain to gain market power and also to gain operational/supply chain efficiencies. This is called vertical integration.

In the past, the supply chain has worked behind the scenes to make businesses work. Supply chains have become increasingly complex as globalization gained traction in the 90s and its relative success has kept it under the radar. As technologies advance and the scale of society increases, more focus will be needed to manage the supply chain effectively. Contentious international relations, the COVID-19 pandemic, and climate change have stressed the supply chain like never before. I'm sure you have noticed higher prices and shortages recently. Skilled supply chain professionals will be required to bring products and services to market in a consistent and predictable way. SCM can play a critical role in addressing climate change as well as some of the economic issues we face today.

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