Supply chain management (SCM) is the process of managing the flow of goods and services to and from a business, including every step involved in turning raw materials and components into final products and getting them to the ultimate customer. Effective SCM can help streamline a company's activities to eliminate waste, maximize customer value, and gain a competitive advantage in the marketplace.

A supply chain management system is the centralized management of the flow of goods and services to and from a company and includes all of the processes involved in transforming raw materials and components into final products. By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster and more efficiently.

Good supply chain management can help prevent expensive product recalls and lawsuits as well as bad publicity.

The five most critical phases of SCM are planning, sourcing, production, distribution, and returns. A supply chain manager is tasked with controlling and reducing costs and avoiding supply shortages.

How Supply Chain Management System Works

The supply chain management system represents an ongoing effort by companies to make their supply chains as efficient and economical as possible. Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies can cut excess costs and needless steps and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors.

A supply chain management system is based on the idea that nearly every product that comes to market does so as the result of efforts by multiple organizations that make up a supply chain. Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operations.