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Supply Chain Management 101: Principles, Examples, and Templates

By Andy Marker | June 25, 2017 (updated February 22, 2022)

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Globalization has become an undeniable part of commerce over the last few decades, as large companies have grown first to source labor and parts from developing regions, and then to start selling in those same areas as they grew in wealth and buying power. Supply chains have had to keep in step, passing through numerous countries to obtain goods most efficiently and cost effectively, and growing more complex as a result. And on the other end, the supply chain grows more frayed in order to deliver to countless countries for consumption. For the largest companies, managing a supply chain can require dedicated teams in every area the chain touches. It’s safe to say that supply chain management is both an art and a science.   This article will cover what a supply chain is, with examples; discuss how supply chain management works and its principles; and vital concepts in the field. Then we’ll move on to current issues and where the field is going. Finally, you’ll find useful resources, templates, and education programs. Ready? Let’s get started.

What Is a Supply Chain?

A supply chain is a collection of suppliers required to create one specific product for a company. The chain is made up of nodes or “links,” which can include multiple manufacturers for parts, then the completed product, then the warehouse where it is stored, then its distribution centers, and finally, the store where a consumer can purchase it. The concept of the chain is important, because each link is connected in a specific direction and order, and the next link cannot be reached without going through the previous one. Each link adds time and costs, and can involve labor, parts, and transportation. Every product a company carries may have its own supply chain, though they may use certain suppliers for multiple products. You can see why this gets so complicated, especially for international supply chains.

The process described above was that of a typical retail supply chain. However, there are many different types in practice. Here are three examples from well-known masters of supply chains:    Example: Walmart and “Big Box” Retailers The “Big Box” store, which represents one of the major disruptions of the retail model from the last century, thrives on size, ubiquity, and well-planned supply chains to drive out the competition. How else would a company like Walmart make a profit on a t-shirt made overseas that retails for $5.00?   Walmart succeeds by having fewer links in its supply chain, and buying more generic goods directly from manufacturers, rather than from suppliers with brand names and markup. It uses “Vendor Managed Inventory” to mandate that manufacturers are responsible for managing products in warehouses owned by Walmart. The company is also is particularly choosy with suppliers, partnering only with those who can meet the quantity and frequency it demands with low prices, and with locations that limit transportation needs. They manage their supply chain like one firm, with all partners operating on the same communication network.    By buying at large enough quantities to take advantage of economies of scale, moving products directly from manufacturers to warehouses, and then delivering to stores which are large enough to be distribution centers, it reduces links in the supply chain and cost per item, translating to low prices for consumers. 

Example: Amazon and “Ecommerce Platforms” Having overtaken Walmart as the world’s largest retailer in the last decade, Amazon’s “online big box” concept is a perfect example of unique supply chains. As an e-commerce shop, obviously they cut the retail store out and ship from distribution center to consumer’s homes directly. Where Amazon innovates is both in its supplier-side and its final supply chain link - delivery.    Just about anyone can sell things on Amazon because it’s a platform, not just a shop. As a result, Amazon has more things than any other online store, so when people shop online, they think of Amazon. Then, it produces everyday goods cheaply, and underbids suppliers. Next, their warehouses make serious use of automation to store items going to like destinations together, ready for immediate transport. Finally, its investments in delivery staff and technology make 2-day shipping a basic expectation, and even same-day delivery a possibility. Amazon ditches third-party logistics (3PL) and fulfills orders itself.

Example: Tesla and Specialized, Owned Chains Automotive manufacturing has come a long way since Henry Ford used assembly line manufacturing to speed up the production of a single car model in a single color. Now, in a time when even American carmakers are opening factories abroad, Tesla is making innovative, incredibly popular, and luxurious cars right in California, a location with incredibly costly real estate.   Rather than having a long supply chain of cheap part makers, they have a vertically integrated supply chain, with a full-service auto plant near its corporate headquarters and plans for a supplier park and a massive battery factory, and Tesla owns it all. Even more interesting is the digital supply chain the company promotes - new firmware and algorithm updates are pushed out to existing car owners over the cloud.

What Is Supply Chain Management?

As the name implies, supply chain management (SCM) is handling and optimizing all the many complicated facets of a supply chain, involving goods and services. Even ensuring timely handoff from manufacturer to shipper to supplier to shipper to buyer is a massive task, but to do it cost effectively and build net value is truly a challenge.    Supply chain management is so important because modern commerce exists in a networked global economy. Most businesses are specialized - even department and big box stores are only really equipped to sell to customers, despite their wide variety of products. The value of vertical integration is hard to justify when communication costs and SCM tools are so inexpensive - it almost always makes more sense to outsource for price efficiency.

The concept of supply chain management was in effect long before the term was created in 1982. In the colonial era, international trade by ship was already making for complicated transportation issues and the need for efficiency. During the Industrial Revolution, the ability to quickly produce goods with machine assistance led to the need to manage significant inventory and constant consumption. By the time history arrives at Henry Ford’s famous assembly line for the world’s first car production in 1913, supply chain management had become an art.    As the century wore on, more companies were producing more goods and looking for ways to reduce costs. They vertically integrated into owned supply chains to try reducing costs at each stage. In the 1980s and on, globalization became a realistic dream for many companies, because of computer systems, easier communication, and commerce-friendly trade laws. Around the 1990s, it became a common practice for firms to specialize, and focus on core competencies and outsourcing the rest, abandoning the vertical integration of the previous era. At this point, supply chains became truly complex, in order to coordinate hundreds of otherwise unrelated and geographically-distant manufacturers, suppliers, shippers, warehousers, and retailers.    Now, in the “SCM 2.0” era, the Internet and new methodologies have led to collaborative platforms and democratized processes. This is allowing smaller competitors to use some of the same manufacturers as major players, and reducing inefficiencies for those manufacturers as a  result. Better communication and planning tools are providing a way for small and large companies alike to manage even more complex supply chains.

Variants of SCM

Global SCM: The combination of global manufacturing with supply chain management, which must account for tariffs and local taxes as goods and services travel internationally to ultimately provide greater value at the end of the chain.   SAP SCM: Systems, Applications, and Products (SAP) is a software company that revolutionized logistics and enterprise resource planning. It provides an automated way to manage supply chain networking, supply chain planning, and supply chain execution, along with production planning, business forecasting, and demand planning.   Logistics and SCM: The art of coordinating efforts between every member of the supply chain to get products from their source to the consumer.    Purchasing and SCM: The focus on the monetary aspect of SCM, from costs to value added at each link in the supply chain.

Principles of Good Supply Chain Strategy

‌ Download Supply Chain Management Checklist

The Basics of Supply Chain Management Processes

There are key supply chain processes that you must take into consideration to effectively understand and manage them. These processes are all at play regardless of the type of supply chain you’re using.   Customer relationship management (CRM) comes first, because as the principles of SCM state, you must adapt everything in the supply chain to the customer. If no one is buying, there’s no need to produce anything. At the front of your supply chain, where a store’s staff interacts with its consumers, they must have plans in place for ongoing relationships. They need CRM tools to gather customer information for marketing and market research, all to determine the products and services to offer in the future.   Customer service management is another process that ties in, as it is where you gather negative and positive feedback to determine future needs.   Demand management is closely linked with the previous two, as it takes customer interactions and orders into account to determine the workload all the way up the supply chain. At its core, customers buying more means make more, and customers buying less means make less. Customer forecasting is an important task that analysts must perform well to determine the current demand and what it will be in the future, to prevent waste in the supply chain.   Product development is an important part of the supply chain that is informed by consumer demand. You must work with CRM and customer service data to determine what they want, which influences new products, product line extensions, and also what to stop making. You must integrate suppliers in this process because it affects cost, quality, and delivery time.   Supplier relationship management goes without saying - if you want to produce your products on time and on budget, you need a solid rapport with everyone you’re outsourcing to in the chain. This impacts manufacturing flow management , which ensures everything gets where it needs to go without delay, and at the correct spec.    Order fulfilment involves coordinating with distribution centers and either retail locations or 3PL to get the product direct to consumers. You’ve now made it all the way back to the beginning of the cycle, and need to pay attention to new CRM and customer service data.   Returns management , also known as the “reverse supply chain,” is a vital part of the flow of products that doesn’t fit perfectly into the clean supply chain cycle. It involves picking up online orders from 3PL locations or from consumers’ addresses and accepting returns at retail locations. Once these items are put back into inventory, they must be ready to get to a different customer while the product run is still live. 

What Supply Chain Managers Look for When Managing Supplier Relationships

One of the most complex parts of SCM is handling all the other people in the supply chain. They have their own needs and motivations, and to keep them all happy and working together with partners they are only loosely affiliated with is a challenge - especially when trying to meet deadlines and turn a profit. The following are what managers should focus on most in such relationships:   Org Chart and Leadership Style: How is the supplier’s organization set up? Is it a vertical or horizontal structure? Is the leadership strong and long lasting, or fickle and prone to change? You need to know who you’ll be interfacing with, and who will be the next one in line should some shakeup occur. Business relationships are always between people, and don’t always survive a reorg.    Management Style: How do the leaders at this supplier run their shop? Make sure it works with your crew. A micromanager at a relatively replaceable link in your supply chain will waste inordinate time, just as a hands-off manager at a vital link could result in sloppy delivery or substandard product quality.   Company Culture: Always important for working with suppliers, determine what kinds of people rise to the top, and how everyone acts when nobody's watching. If, for example, middle managers are constantly in fear for their jobs because of ruthless quarterly performance reviews, they may over-promise, make excuses, or otherwise be unstable work partners.    Product Flows: Once you know that you can work with the people, make sure their facilities are in order. Are they equipped for orders of the size and frequency you plan to make? How do they handle emergency, fast-turn around orders? What about other customers - are they only able to use their facilities for your product flows at certain portions of the month due to full inventory? Leave no stone unturned.   Information Flows: Just as vital is the ability to control information about the day-to-day flow of materials, and to communicate and coordinate long-term plans. Is the supplier up on their product details, inventory, and SKU organization? Is their security and encryption up to the standards of your company, and your industry? Big data is useless if the right people don’t see it in time.   Rewards and Risks: Take into account opportunities and threats of working with this supplier. Maybe they’re well-equipped to handle your exact product because they also work with your competitors. Perhaps they are new and establishing themselves, so offer a substantial discount, but may not be able to deliver on time? Do what’s best for the company, and use risk assessment to keep your whole supply chain operable.

Vital Supply Chain Management Concepts to Know

Having a passing familiarity with the following terms will help you see just what kind of skillset and abilities will be required when working in supply chain management:   Border Adjustment Tax: Also known as a destination-based cash flow tax (DBCFT), it is a tax levied on imported goods which is important to know in global supply chains.   Customer Relationship Management: Also known as CRM, this concept refers to providing ongoing service to customers and collecting data about their likes and purchases. There are also CRM tools that help automate and record interactions with customers.   Cumulative Mean: A figure for knowing how much or how little to produce in advance, involving mean orders with all previous data treated as equally useful.   Demand Management: Understanding customer behavior and patterns to control how much is ordered and produced at each link in the supply chain, with the goal of eliminating wasted production.   Financial Flows: Credit terms, payment schedules, accounts payable and receivable, and other factors that you must monitor to determine if a supply chain is profitable or not.   Information Flows: Transmission of orders, delivery status, and other data that influence the supply chain’s responsiveness to demand.   Integrated SCM: This is a method of SCM wherein all of the links are tightly integrated, operating almost as one company rather than a loose association of buyers and sellers.   Inventory Management: Monitoring and controlling orders, storage, and use of owned components to create the products your company sells.   Lean Six Sigma: A data-backed philosophy of continuous improvement that focuses on preventing defects and mistakes rather than discovering them later, which reduces waste and production time via standardization. Read Everything You Need to Know About Lean Six Sigma to learn more about this methodology.    Logistics: The physical movement of products from one link in the supply chain to the next, and the practice of improving their efficiency.   Make vs. Buy: A simple evaluation of whether it is more cost-effective and time-efficient to produce a required product with your company’s existing resources, or to outsource the need.   New Product Development: The creation of new products both in response to and in anticipation of customer demand, using data gleaned from CRM and the whole supply chain. Read Innovation for Everyone: Everything You Need to Know About New Product Development to learn more about this process.   Operational Accounting: Accounting for a company that focuses on planning, directing, and controlling of daily activities by their costs and eliminating waste.   Physical Flows: The actual movement of parts and products throughout the supply chain, which the Logistics team must manage and analyze to keep going without pause.   Project Management: The process and tools involved in ensuring that a codified piece of work (project or product) gets done on time while keeping all contributors aware of their next step.   Reverse Supply Chain: Aftermarket customer service, which may involve accepting returns, refurbishing and discounting, or otherwise finding use for the reacquired inventory.   Risk Management: Identifying, evaluating, and then choosing which risks to address first, with the goal of reducing overall risk in a supply chain.   S&OP: Sales and Operations Planning is a management process that aligns its constituent parts to ensure that the organization is only focused on operations that improve sales. Learn more about S&OP here .   Strategic Sourcing: Formalizing a company’s information gathering in order to use its purchasing power to take advantage of the best values in the marketplace of suppliers.   Theory of Constraints: A methodology that identifies the largest limiting factor in production, then finding a way to remove it to improve the efficiency of the entire production.

Current Issues in SCM

In addition to the major terms, it’s important to keep aware of legal, political, and social events which affect supply chain management when seeking a career in the field. Here are some of the bigger issues of the day:   Dodd-Frank Decision: This was a 2010 law which included a clause on “Conflict Minerals.” It requires companies to audit their supply chains in order to determine whether gold, tungsten, tantalum, and tin came from the Democratic Republic of the Congo, and report on their due diligence. It adds an extra layer of complexity and costs to SCM for those involved in chains with those minerals.   NGO Actions: Activist groups of all kinds work to end common practices within major companies’ supply chains, such as sweatshop labor, or push consumers towards less complicated supply chains by encouraging them to support local businesses and farms.    SEC Regulations: Whereas NGO actions can force a company’s hand for PR reasons or changing the marketplace of ideas, the Securities and Exchange Commission can slap that same company with fines, making company’s quick to comply. Third-party audits of supply chains are an important part of keeping in step with these regulations.    SECH Ratings: This is a rating that involves economic, social, and environmental judgements to gauge a company’s overall sustainability.   Transparency: Though protecting data is important, certain measures of transparency can improve company performance. Among consumer products, many younger, disruptive brands make their supply chain a selling point in marketing by being upfront about how and where they get their components, and where they make their products. The reasoning goes, if a company is hiding something, there must be an unethical component to it.   Sustainability Measures: As major companies and countries around the globe move towards sustainable production, all supply chains become impacted. Whether due to changing regulations or seeking good PR, many companies are working to reduce pollution and other issues in their chain.

The Future of Supply Chain Management

Aside from the issues of the day, it’s also vital to see where the field is going. The future of SCM is bright, but certainly evolving. We asked a group of experts and innovators in supply chain management to discuss what they believe the future of SCM holds: ​

Jake Rheude , Director of Business Development and Marketing for Red Stag Fulfilment

Over the next decade, we will see massive and disruptive forms of innovation both in terms of technology that expedites the speed at which customers receive their products ( drone delivery ) as well as technologies that drastically enhances the online shopping experience for customers, ( virtual reality ).

While these and other technologies no doubt have the opportunity to significantly change the landscape of online shopping and the supply chain, I expect we will see firms diverge on two different strategies. Some will rush to implement these costly new technologies in order to drive down the total time between an order being placed and last mile delivery, while other firms will stand by the current landscape (for most B2C online sellers) of product delivery in approximately two-days, acting cautiously, particularly in regards to the cost of these new technologies versus their impact on the overall value chain for consumers.

Certainly, there are niche industries where significant investments in drone delivery technology will provide a distinct competitive advantage, but I predict that for many B2C online sellers, the impact on the overall value chain of these new technologies will be misaligned with a consumer's perception of value, and therefore make the initial cost of these new technologies unjustified.

Lauren Stafford , Digital Publishing Specialist for Explore WMS

Embracing big data is an essential principle of modern SCM, specifically real-time data which has the potential to improve the efficiency of a supply chain and negate potential risks to strategy. We know that logistics optimization through technological innovations and data integration can make supply chains more efficient and more financially sound.

The future of the multi-modal SCM depends on successful integration with data and systems to achieve synchromodality. To achieve this, there needs to be a connection to all available transport modalities in the form of a real-time data flow. Once any issues with connectivity are addressed, a ranking system is required to consider a variety of variables such as dock schedules and material restrictions. Pricing data is another integral component.

The great advantage of a synchromodal platform is that it’s informed by every available option and makes a selection based on key factors like speed requirements. There is still significant work to be done in terms of how best to access and integrate a supply chain partner’s real-time data but, as these platforms are developed, we’re likely to see faster order processing times for large shipments and systems which can help generate a better ROI. The way we understand it, SCM is changing because now an efficient supply chain can be a competitive asset as opposed to a cost center.

John Boyd , founder of The Boyd Company, Inc

Probably the most dynamic link in the supply chain in recent years has been the "last mile": that movement of goods from a DC to a final destination in the home. E-commerce king Amazon has done much to challenge and ultimately rewrite the rules of last mile delivery. Last mile delivery has also produced a new warehousing subsector: the locker. Studies show that online shoppers not only want their packages now, they also want their packages delivered to places other than their homes. These lockers can be viewed as "micro warehouses" and will come with additional costs. We expect many to be operated by an emerging sector of third-party logistics (3PL) providers specializing in this particular segment of the supply chain.

Lockers are now common in Europe, where densely populated and congested urban centers make them a natural fit. We anticipate that lockers will also become the next boom sector within logistics/distribution site selection in the United States. Amazon already has automated lockers in six states, while the U.S. Postal Service has lockers located within post offices in the Washington, D.C., area.

Upstart third-party logistics providers will be looking for sites where they can locate lockers, such as in transit centers, apartment buildings, convenience stores, or any establishment that provides off-hours access for picking up packages. Also, the growing online meals industry is expected to fuel the need for temperature-controlled lockers for the delivery of perishables.

Careers in Supply Chain Management

With a bright future filled with unique challenges, a career in SCM is a strong choice. It might be surprising to hear about an industry that’s all about outsourcing and automation, but new experts are more vital than ever for global organizations and even local ones to grow. Look at these industry stats:

Career Paths

What kind of positions can you take on in supply chain management?   Supply Chain Business Analyst: Examine your company’s workflow and come up with creative ways to streamline its business processes. Live and breathe efficiency.   Inventory Control Administrator: Ensure that inventory systems’ data is accurate with physical inventory, troubleshoot discrepancies, discover root causes and interact with everyone related to this inventory.    Purchasing Specialist: Work out deals with suppliers and compare bids to minimize cost across the supply chain.   Procurement Manager: Research, evaluate, and purchase large quantities of products for companies to resell or use in operations. Determine what is in your company’s store, ecommerce shops, and more.    Operations Analyst: Evaluate, report on, and improve the management of activities that generate recurring revenue for your organization, i.e. its core competencies.   Material Planning Manager: Plan, monitor, and manage products and the materials required to make them in your organization’s manufacturing operations. You ensure the constant flow of materials so the factory never runs out. 

Logistics Analyst: Evaluate and report on transportation of goods and services up and down your organization’s supply chain, ensuring that everything gets where it needs to go and when it needs to get there.

Top Higher Education Programs

Supply chain management is a game with global stakes, as such major universities and academies around the world offer Bachelor’s and Master’s degrees in the subject. If you want to secure a job in the sector with a Fortune 500, becoming accredited in SCM is vital. Look at some of the top schools on this list for more details on breaking into the industry:

• Cambridge University
• Copenhagen Business School
• Cranfield School of Management
• Eindhoven University of Technology
• London Business School
• Vlerick Business School

Certifications in Supply Chain Management

If a full Master’s program seems like too big a commitment, explore some of the short-term certifications available below. They give you a shot at entry level jobs if you’re inexperienced, and are a nice brush-up on current SCM standards for seasoned professionals.

• Chartered Institute of Supply Chain Management (CISCM) Chartered Supply Chain Management Professionals (CSCMP)
• Institute for Supply Management (ISM) Certified Professional in Supply Management (CPSM)
• Institute of Supply Chain Management (IOSCM)
• International Institute for Procurement and Market Research (IIPMR) Certified Supply Chain Specialist (CSCS) , Certified Procurement Professional (CPP) and Certified Supply Chain Associate (CSCA)
• International Supply Chain Education Alliance (ISCEA) Certified Demand Driven Planner (CDDP) and Certified Supply Chain Manager (CSCM)
• Association (SCMA) Supply Chain Management Professional (SCMP)
• The Association for Operations Management (APICS) Certified Supply Chain Professional (CSCP) and Certified Production and Inventory Management (CPIM)

Supply Chain Management Templates

Outside of the physical work of checking inventory, or the personal work of communicating with different members of the supply chain’s links, much of your work as a supply chain manager is using systems and dashboards to get an understanding of logistics, operations, and flows. What follows are some templates that can help manage and streamline workflow, while understanding and sharing inventory reports and more.

Download Risk Management Matrix Template

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Download Stock Inventory Control Template

Excel  |  Smartsheet

‌ Download Supply Chain Dashboard Template

‌ Download Microsoft Excel Template for Choosing MRP Software

‌ Download RFP Vendor Template

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Supply Chain Management (SCM): How It Works & Why It's Important

What Is Supply Chain Management (SCM)?

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.

Key Takeaways

• Supply chain management (SCM) 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.

Investopedia / Alex Dos Diaz

How Supply Chain Management Works

Supply chain management 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.

SCM 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.

A supply chain manager's job is not only about traditional logistics and purchasing but finding ways to increase efficiency and keep costs down while also avoiding shortages and preparing for unexpected contingencies. Typically, the SCM process consists of these five phases:

To get the best results from SCM, the process usually begins with planning to match supply with customer and manufacturing demands. Companies must try to predict what their future needs will be and act accordingly. This will take into account the raw materials or components needed during each stage of manufacturing, equipment capacity and limitations, and staffing needs. Large businesses often rely on enterprise resource planning (ERP) software to help coordinate the process.

Effective SCM processes rely very heavily on strong relationships with suppliers. Sourcing entails working with vendors to supply the materials needed throughout the manufacturing process. Different industries will have different sourcing requirements, but in general, SCM sourcing involves ensuring that:

• The raw materials or components meet the manufacturing specifications needed for the production of the goods.
• The prices paid the vendor are in line with market expectations.
• The vendor has the flexibility to deliver emergency materials due to unforeseen events.
• The vendor has a proven record of delivering goods on time and of good quality.

Supply chain management is especially critical when manufacturers are working with perishable goods. When sourcing goods, companies should be mindful of lead times and how well equipped a supplier is to meet their needs.

Manufacturing

This is the heart of the supply chain management process, where the company uses its machinery and labor to transform the raw materials or components it has received from its suppliers into something new. This final product is the ultimate goal of the manufacturing process, though it is not the final stage of supply chain management.

The manufacturing process may be further divided into sub-tasks such as assembly, testing, inspection, and packaging. During the manufacturing process, companies must be mindful of waste or other factors that may cause deviations from their original plans. For example, if a company is using more raw materials than planned and sourced for due to inadequate employee training, it must rectify the issue or revisit the earlier stages in SCM.

Once products are made and sales are finalized, a company must get those products into the hands of its customers. A company with effective SCM will have robust logistic capabilities and delivery channels to ensure timely, safe, and inexpensive delivery of its products.

This includes having a backup or diversified distribution methods should one method of transportation temporarily be unusable. For example, how might a company's delivery process be impacted by record snowfall in distribution center areas?

The supply chain management process concludes with support for the product and customer returns. It's bad enough when a customer needs to return a product, but even worse if that's due to an error on the company's part. This return process is often called reverse logistics, and the company must ensure it has the capabilities to receive returned products and correctly assign refunds for them. Whether a company is conducting a product recall or a customer is simply not satisfied with the product, the transaction with the customer must be remedied.

Returns can also be a valuable form of feedback, helping the company to identify defective or poorly designed products and to make whatever changes are necessary. But without addressing the underlying cause of a customer return, the supply chain management process will have failed, and future returns will likely persist.

Supply chain management does not look the same for all companies. Each business has its own goals, constraints, and strengths that will shape its SCM process. These are some of the models a company can adopt to guide its supply chain management efforts.

• Continuous flow model: One of the more traditional supply chain methods, this model is often best for mature industries. The continuous flow model relies on a manufacturer producing the same good over and over and expecting customer demand will show little variation.
• Agile model: This model is best for companies with unpredictable demand or custom-order products. This model prioritizes flexibility, as a company may have a specific need at any given moment and must be prepared to pivot accordingly.
• Fast model: This model emphasizes the quick turnover of a product with a short life cycle. Using a fast chain model, a company strives to capitalize on a trend, quickly produce goods, and ensure the product is fully sold before the trend ends.
• Flexible model: The flexible model works best for companies affected by seasonality . Some companies may have much higher demand requirements during peak season and low volume requirements in others. A flexible model of supply chain management ensures that production can easily be ramped up or wound down.
• Efficient model: For companies competing in industries with very tight profit margins, a company may strive to get an advantage by making its supply chain management process the most efficient. This includes utilizing equipment and machinery in the most ideal ways in addition to managing inventory and processing orders most efficiently.
• Custom model: If any model above doesn't suit a company's needs, it can always turn toward a custom model. This is often the case for highly specialized industries with high technical requirements, such as an automobile manufacturer.

Understanding the importance of SCM to its business, Walgreens Boots Alliance Inc. decided to transform its supply chain by investing in technology to streamline the entire process. That included using big data , collected from its 9,000 stores and 20,000 suppliers, to help improve its forecasting capabilities and better manage sales and inventory. In 2019 it appointed its first-ever chief supply chain officer, a key leadership role in the company.

The company has also incorporated supply chain management into its environmental, social, and governance (ESG) initiatives, including those involving human rights, animal testing, sustainability, and transparency regarding product ingredients.

Why Is Supply Chain Management Important?

Supply chain management is important because it can help achieve several business objectives. For instance, controlling manufacturing processes can improve product quality, reducing the risk of recalls and lawsuits while helping to build a strong consumer brand. At the same time, control over shipping procedures can improve customer service by avoiding costly shortages or periods of inventory oversupply. Overall, supply chain management provides multiple opportunities for companies to improve their profit margins and is especially important for businesses with large and international operations.

How Are Ethics and Supply Chain Management Related?

Ethics has become an increasingly important aspect of supply chain management, so much so that a set of principles called supply chain ethics was born. Many investors today want to know how companies produce their products, treat their workforce, and protect the environment. As a result, companies respond by instituting measures to reduce waste, improve working conditions, and lessen their impact on the environment—all of which can involve SCM.

How Much Do Supply Chain Management Jobs Pay?

Supply chain managers across the United States had average annual salaries in the range of $109,645 to $140,513 as of December 2023, according to the website Salary.com.

A supply chain starts with the ordering of raw materials or components from a supplier and ends with the delivery of a finished product or service to the end consumer. In supply chain management, every link in that chain may offer an opportunity to add value or reduce inefficiency. A well-run SCM program can increase a company's revenues, decrease its costs, and bolster its bottom line .

Cision PR Newswire. " Walgreens Transforms Supply Chain Management with Kyvos, Tableau, and Big Data ."

Walgreens Boots Alliance. " Walgreens Boots Alliance Announces Key Leadership Appointments Live ."

Walgreens Boots Alliance. " Environmental, Social & Governance. "

Salary.com. " Supply Chain Manager Salary in the United States ."

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Supply chain management is the handling of the entire production flow of goods or services—starting from the raw components to delivering the final product to consumers. A company creates a network of suppliers that move the product from raw materials suppliers to organizations that deal directly with users.

Effective supply chain management systems minimize cost, waste and time in the production cycle. The industry standard has become a just-in-time supply chain where retail sales automatically signal replenishment orders to manufacturers. Retailers can then restock shelves almost as quickly as they sell products. One way to further improve on this process is to analyze the data from supply chain partners to see where to improve further.

By analyzing partner data, CIO identifies three scenarios where effective supply chain management increases value to the supply chain cycle: 1

Identifying potential problems

When a customer orders more products than the manufacturer can deliver, the buyer can complain of poor service. Through data analysis, manufacturers might be able to anticipate the shortage before the buyer is disappointed.

Optimizing price dynamically

Seasonal products have a limited shelf life. At the end of the season, retailers typically scrap these products or sell them at deep discounts. Airlines, hotels and others with perishable “products” typically adjust prices dynamically to meet demand. By using analytic software, similar forecasting techniques can improve margins, even for hard goods.

Improving the allocation of “available to promise” inventory

Analytical software tools help to dynamically allocate resources and schedule work based on the sales forecast, actual orders and promised delivery of raw materials. Manufacturers can confirm a product delivery date when buyers place orders—significantly reducing incorrectly-filled orders.

This guide summarizes what sustainability-forward organizations look for in their ESG software platform to help achieve their goals.

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Most experts and practitioners refer to five critical components of supply chain management:

Plan and manage all resources required to meet customer demand for a company’s product or service. When the supply chain is established, determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers and meets company goals.

Choose suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. Key processes include: ordering, receiving, managing inventory and authorizing supplier payments.

Organize the activities required to accept raw materials, manufacture the product, test for quality, package for shipping and schedule for delivery.

Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments.

Create a network or process to take back defective, excess or unwanted products.

The supply chain is the most obvious “face” of the business for customers and consumers. The better and more effective a company’s supply chain management is, the better it protects its business reputation and long-term sustainability.

IDC defines supply chain management by identifying the five Cs of the effective supply chain management of the future: 2

• Connected: Accessing unstructured data from social media, structured data from the Internet of Things (IoT) and more traditional data sets available through traditional enterprise resource planning (ERP) and business-to-business (B2B) integration tools.
• Collaborative: Improving collaboration with suppliers increasingly means the use of cloud-based commerce networks to enable multi-enterprise collaboration and engagement.
• Cyber-aware:  Hardening systems and protecting them from cyber-intrusions and hacks is a crucial enterprise-wide concern for the supply chain.
• Cognitively enabled:  Collating, coordinating, and conducting decisions and actions across the chain, the AI platform serves as the modern supply chain's control tower, enabling most of the supply chain to be automated and self-learning.
• Comprehensive: Scaling analytics capabilities with data in real time to ensure that insights are comprehensive and fast is critical, as latency is unacceptable in the future supply chain.

Many supply chains have begun this process, with participation in cloud-based commerce networks at an all-time high and with major efforts underway to bolster analytics capabilities.

While yesterday’s supply chains focused on the availability, movement and cost of physical assets, today’s supply chains are about the management of data, services and products bundled into solutions. Modern supply chain management systems are about much more than just where and when. Supply chain management affects product and service quality, delivery, costs, customer experience and ultimately, profitability.

As recently as 2017, a typical supply chain accessed 50 times more data than just five years earlier. However, experts analyze less than a quarter of this data. That means the value of critical, time-sensitive data—such as information about weather, sudden labor shortages, political unrest and microbursts in demand—can be lost.

Modern supply chains take advantage of massive amounts of data that the chain process generates and that analytical experts and data scientists curate. Future supply chain leaders and the ERP systems they manage will likely focus on optimizing the usefulness of this data—analyzing it in real time with minimal latency.

With IBM Services®, you can evolve your supply chain processes into intelligent workflows to reach new levels of responsiveness and innovation. Challenge siloed processes to uncover efficiencies and enable your teams to execute and deliver. Use emerging technologies like AI and blockchain to unlock opportunities in every step of the value chain—from demand planning to order orchestration and fulfillment.

A supply chain control tower is traditionally defined as a connected, personalized dashboard of data, key business metrics and events across the supply chain.

Order management is the tracking of orders from inception to fulfillment, and the management of the people, processes and data connected to the order as it moves through its lifecycle.

Inventory management, a critical element of the supply chain, is tracking inventory from manufacturers to warehouses and from these facilities to the point of sale.

EDI is the intercompany communication of business documents in a standard format. It is a standard electronic format that replaces paper-based documents such as purchase orders or invoices.

Supply chain analytics helps to make sense of the massive amounts of data a supply chain generates by uncovering patterns and generating insights.

Supply chain optimization makes use of technology and resources like blockchain, AI and IoT to maximize efficiency and performance in a supply network.

Blockchain for supply chain solutions help supply chain leaders use data to handle the disruptions of today and build resiliency for the future.

B2B integration is the automation of business processes and communication between two or more organizations.

MFT is a technology platform that allows organizations to reliably exchange electronic data securely and in compliance with applicable regulations.

IBM Sterling® Order Management software enables you to orchestrate your entire fulfillment network with powerful core capabilities and next-level options.

The IBM Sterling® Transparent Supply application provides a blockchain platform that enables companies to join or build their own data-sharing network with trusted supply chain partners.

IBM Food Trust® is a collaborative network of growers, processors, wholesalers, distributors, manufacturers, retailers and others, enhancing visibility and accountability across the food supply chain.

Retail technology solutions from IBM® help optimize your retail supply chain with the ability to respond to trends at any scale.

Find articles on everything from supply chain sustainability to relevant technology trends and government regulations.

Make your supply chain smarter, resilient and more sustainable with state-of-the-art solutions from IBM.

Explore five essential supply chain management strategies that can help chief supply chain officers distinguish themselves from the competition.

Learn how Farmer Connect and IBM Food Trust are connecting coffee growers and consumers with blockchain.

IBM Sterling Supply Chain Intelligence Suite is an AI-based optimization and automation solution. Designed for organizations struggling to solve supply chain disruptions through traditional transformation, the suite facilitates supply network resiliency and sustainability, increases agility and accelerates time-to-value through actionable insights, smarter workflows and intelligent automation.

1 " What is supply chain management? Mastering logistics end to end " (link resides outside ibm.com), Bart Perkins, Sarah K. White, Thomas Wailgum, CIO, 28 October 2021

2 " The Path to a Thinking Supply Chain " , Simon Ellis, John Santagate, IDC Technology Spotlight, August 2018

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An Introduction to Supply Chain Management (SCM)

Table of Contents

What is supply chain management, what is a supply chain, supply chain management process, parts of a supply chain model, benefits of supply chain management, supply chain management faq.

Supply chain management (SCM) is the discipline that manages the flow of supplies through all of the stages of a production cycle. SCM applies to any organization that executes projects, produces goods or provides services, as those activities require a supply chain to maintain a steady flow of resources.  That’s where supply chain management comes in.

Supply chain management is very important in the business administration field because it affects other key business areas such as operations management, inventory control and quality management. But what really makes SCM so important is that it can also become an important competitive advantage for businesses.

The main goal of supply chain management is to make the most of the resources involved in a supply chain and be as productive as possible. People are managed and supplies require management as well . Whether those supplies are goods or services, they must be accounted for and carried through from start to finish with deliberate control. To better understand SCM, let’s define what a supply chain is.

A supply chain is a network that connects a company to suppliers of raw materials. It is also used to deliver a product to customers. The better the supply chain management, the more of a competitive advantage the company has.

Supply chains are steps that are required to get raw materials, products or services from the original state to the customer and improve customer relations. Large companies and projects usually have more than one supply chain, which is known as a supply network. Having supply chain managers and supply chain management is key to delivering customer value and maximizing the efficiency of your supply network.

Project management software can help you manage your supply chain and supply network. ProjectManager is a cloud-based work and project management software that has visual workflow features, such as kanban boards, that help keep your teams working at capacity without excess raw materials that need storage space. Get started with ProjectManager today for free!

The supply chain process is fundamental to good supply chain management. It is used by companies to make their supply chain as efficient and cost-effective as possible and deliver customer value and give them a competitive advantage. There are five steps to the supply chain process. They are as follows.

1. Planning

In order to control inventory and the manufacturing process companies must plan to match demand with supply, which is known as supply chain planning . This prevents overspending on warehouse space or not having raw materials needed for your manufacturing and slowing down delivery of product.

2. Sourcing

This step involves finding those vendors who can get the goods and services you need when you need them. Sourcing is how you get supplies when you need them and meet the demand of your customers .

Here is where those raw materials you procured are made into the products that meet your customers’ demand. This is where assembling, testing and packing occurs. Getting customer feedback is key to delivering customer value.

4. Delivering

Getting your finished product to the customer is the next crucial step in the SCM process. If you’re not able to get what you make to your customers all the previous steps are for naught. This makes delivering key to supply chain performance.

5. Returning

Returning or reverse logistics is part of what’s called post-delivery customer support process. It is important to have a clear channel for returns or risk tarnishing your brand. The company can then take these low quality, defective or expired materials and return them to their suppliers.

Related: 10 Free Manufacturing Excel Templates

To get the most out of SCM requires looking at the big picture in terms of an organization’s management. No longer is managing an individual company function enough. The integration of all activities involved in the supply chain is necessary: that means integration between different departments, such as purchasing and marketing.

Supply chain management also needs integration and collaboration between buyers and suppliers, joint product development, common systems and shared information. Here are the most important parts of any SCM system or model.

• Customer-Relations Management: There must be a managed approach to interacting with the company’s current and potential customers in order to understand what they want and expect.
• Customer-Service Management: This differs from customer-relations management in that it focuses on the interactions between the customer and the company instead of a more strategic management process. It helps facilitate a mutually satisfying goal for both customer and the company, as well as eliciting customer feedback and maintaining communications between the two parties, so there are positive feelings from both parties.
• Demand-Management Style: A methodology to forecast, plan for and manage the demand for products and services. This can address both macro-levels, as in global economics, but also micro-levels within the company.
• Order Fulfillment: The order fulfillment process that encompasses everything from point-of-sale interest to delivery of that product or service to the customer. It is the way a company responds to customer orders.
• Manufacturing-Flow Management: Manufacturing is a process, and supplies feed that process based on historic data surrounding how it has been done and what was needed historically. But that process needs flexibility as quantities change. Therefore, one must manage all activities related to planning, scheduling and managing the manufacturing process.
• Supplier Relationship Management (SRM): Supplies likely are coming from a third party, and those interactions must be strategically planned for. SRM is key to a healthy supply chain.
• Product Development and Commercialization: To reduce time to market, customers and suppliers are integrated into product vision and the product development process. Shortening the product life cycle keeps the company competitive. This process includes coordinating with customer relationship management to know customer needs, selecting materials and suppliers with procurement and developing a production technology in the flow of manufacturing to integrate the best supply chain flow for the product and market. When successful, this has a positive impact on cost, quality, delivery and market share.
• Returns Management: There will always be returns and the better they’re managed, the more productive and competitive the SCM process. Management of this aspect of the SCM means fast and easy returns management, automation and deciding how to process returned materials. Make sure information is visible to capture early in the process. Then control the flow of product, including receipts and reconciliation, noting if there are any quality issues.

Supply chain management is a hefty task with hefty rewards. Here are a few ways that well-executed SCM can benefit your business or project.

Keeps Businesses Competitive & Paces with Technology

The simple answer to why SCM is important to any business is that it helps them remain competitive. Markets change, and as the marketplace becomes increasingly global, the need for better efficiency is crucial. As management goals change, too, there is a move away from the past traditional relationships to incorporate and organize all business processes throughout a value chain of multiple companies.

Advances in information technology and the increasing use of outsourcing has also added to the expansion of the supply chain. This has created a need for a more collaborative network, so different enterprises can work harmoniously together.

Creates Productive Environments

These changes in how businesses are managed have led to the development of supply chain environments. Multinational companies, joint ventures, strategic alliances and other partnerships, as well as technological advancements, have contributed to more cooperation among those in the supply chain network. As supply chains become more holistic and cooperative, companies must adapt.

Proactive Strategy

But supply chain management is not merely reactive, it also helps to stimulate innovation and productivity by assisting companies with organizational learning. The more extended a company is in terms of its supply chain, the more adaptive it has to be. That leads to creative thinking, which results in innovation and increased productivity.

Satisfies Customers While Reducing Operating Costs

Customer service also benefits. Customers demand quality and they expect products to be available where and when they want them or delivered when on time. Supply chain management will also help with sale support after they’ve made the purchase.

But it’s not just the customer who benefits. As noted, SCM is instrumental in cutting operation costs. When smartly applied it can decrease purchasing, production and total supply change costs. This improves a company’s financial position by adding to profit leverage, reducing fixed assets and increasing cash flow.

SCM is a complex topic and you might have even more questions about it. Here are some quick answers about supply chain management topics.

What are the Components of Supply Chain Management (SCM)?

The 5 components of the supply chain management process are planning, sourcing, making, delivering and returning.

What Is Supply Chain Analysis?

Supply chain analysis is the process of auditing all the different steps of the supply chain to identify any possible areas of improvement.

What Is a Supply Chain Strategy?

A supply chain strategy is a roadmap that a company uses to source information, materials and equipment from its suppliers to create products and deliver them to its customers.

Supply chain management is just one more screw that can be tightened on the ship of business to help it sail better through the turbulent waters of industry. But it’s a complicated process, one that benefits from having robust project management tools to plan, monitor and report on the many aspects of the supply chain that need control. ProjectManager is a cloud-based software that has the tools to make you manage more efficiently and effectively. See what it can do by taking this free 30-day trial.

Supply Chain Management Assignment

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Supply Chain Management (SCM)

Supply chain management (SCM) is the optimization of the development and flow of a product from the procurement of raw material to manufacturing, logistics, and delivery to the final customer. It requires the aggressive streamlining of the supply-side operations of a company to optimize consumer satisfaction and achieve strategic market advantage. Interconnected, interrelated, or interlinked organizations, channels, and hub organizations consolidate in the arrangement of items and administrations needed by end clients in a store network. An organization makes an organization of providers (“links” in the chain) that move the item along from the providers of crude materials to those associations that manage clients. Supply chain management is described as the “design, planning, 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.”

SCM reflects an initiative by manufacturers to build and incorporate as effective and economical supply chains as possible. It envelops the incorporated arranging and execution of cycles needed to deal with the development of materials, data, and monetary capital in exercises that extensively incorporate interest arranging, sourcing, creation, stock administration and capacity, transportation or coordination’s and returning overabundance or deficient items. SCM usually attempts to centrally monitor or connect a product’s production, shipping, and distribution. Companies are able to cut excess costs and deliver goods to the market quicker by controlling the supply chain. This is achieved by maintaining better control over internal inventories, internal manufacturing, distribution, sales, and company vendor inventories.

There are five components of traditional supply chain management systems:

• Planning: Plan and manage all resources necessary for the product or service of a business to satisfy customer demand. Determine metrics to measure whether the supply chain is reliable, efficient, provide value to consumers, and meets company objectives when the supply chain is formed.
• Sourcing: Choose suppliers to provide the products and services required for the product to be made. Then, develop procedures to track and maintain relationships with suppliers. Main processes include: purchasing, obtaining, inventory management, and approving payments from suppliers.
• Manufacturing: Organize the activities needed for the acceptance of raw materials, the production of the product, the quality test, the shipping package, and the delivery schedule.
• Delivery and Logistics: Coordinate and collect payments for customer orders, plan deliveries, dispatch loads, invoice customers.
• Returning: All product returns, including faulty products and products that will no longer be funded, are included in the return stage. This stage also includes components, including inventory and transportation management, from other stages.

Advertising channels assume a significant part in-store network of the board. Momentum research in inventory network the board is worried about themes identified with supportability and danger the executives, among others. SCM depends on the possibility that virtually every item that comes to showcase results from the endeavors of different associations that make up a store network. Although supply chains have been around for years, most businesses have only recently been paying attention to them as a value-add to their activities. Some indicate that SCM’s “people dimension,” ethical problems, internal integration, transparency/visibility, and management of human capital/talent are subjects that have been under-represented on the research agenda so far.

Management of the supply chain depends on both business policy, advanced tools, and teamwork to operate. Since it’s a particularly far-reaching, complex endeavor, each accomplice from providers to makers and past should convey and cooperate to make efficiencies, oversee hazards and adjust rapidly to change. In SCM, the production network supervisor facilitates the coordination of all parts of the production network which comprises of five sections:

• The plan or strategy
• The source (of raw materials or services)
• Manufacturing (focused on productivity and efficiency)
• Delivery and logistics
• The return system (for defective or unwanted products)

In the manufacturing cycle, efficient supply chain management systems reduce expense, waste, and time. A just-in-time supply chain has become the industry norm, where retail purchases immediately signal replenishment orders to suppliers. Retail retires would then be able to be restocked nearly as fast as the item is sold. One approach to additionally enhance this cycle is to dissect the information from inventory network accomplices to see where to encourage upgrades can be made. Productivity and productivity improvements go straight to the bottom line of a corporation and have a true and lasting impact. Good management in the supply chain keeps firms out of the headlines and away from costly recalls and litigation.

Supply-chain management, methods with the point of planning all pieces of SC (Supply-Chain) from providing crude materials to conveying as well as a resumption of items, attempts to limit all out expenses concerning existing clashes among the chain accomplices. The partnership between the sales department wanting to provide higher inventory levels to satisfy requirements and the warehouse for which lower inventories are needed to minimize keeping costs is an example of these conflicts. Control of the supply chain management a range of advantages that lead to higher profits, improved brand recognition, and greater competitive advantage. These include the following:

• better ability to predict and meet customer demand;
• better supply chain visibility, risk management, and predictive capabilities;
• fewer process inefficiencies and less product waste;
• improvements in quality;
• increased sustainability, both from a societal and an environmental standpoint;
• lower overhead;
• improvements in cash flow; and
• more efficient logistics.

The supply chain is the most self-evident “face” of the business for clients and buyers. The better and more compelling an organization’s store network the board is, the better it ensures its business notoriety and long-haul maintainability. In 1982, in a Financial Times interview, Keith Oliver, a consultant at Booz Allen Hamilton, introduced the word ‘supply chain management’ to the public domain. In 1983 WirtschaftsWoche in Germany published for the first time the results of an implemented and so-called “Supply Chain Management project”, led by Wolfgang Partsch. “supply-chain management (SCM)” came to popularity in the late 1990s, and operations managers started to use it with increasing regularity in their names.

Supply Chain Management (SCM) manages every touchpoint, from initial development to final delivery, of the product or service of a business. With such countless spots along with the store network that can add an incentive through efficiencies or lose an incentive through expanded costs, legitimate SCM can build incomes, decline expenses, and effect an organization’s primary concern. Modern management systems for the supply chain are about much more than just where and when. Management of the supply chain impacts the consistency of the product and service, distribution, costs, consumer engagement, and, eventually, profitability.

Great supply chain management keeps organizations out of the features and away from costly reviews and claims. The most fundamental form of a production network incorporates an organization, its providers, and the clients of that organization. In the 2019-2020 war against the coronavirus (COVID-19) pandemic that spread across the globe, the significance of supply chain management proved crucial. Governments in countries that had successful domestic supply chain management in place had ample medical supplies to meet their needs during the pandemic period and enough to donate their surplus to front-line health workers in other jurisdictions. A few associations had the option to rapidly create unfamiliar stockpile fastens to import truly necessary clinical supplies.

The vast quantities of data produced by the chain process are taken advantage of by modern supply chains and are curated by analytical experts and data scientists. Future supply chain leaders and their controlled Enterprise Resource Planning (ERP) programs would likely concentrate on maximizing the utility of this data by evaluating it with minimal latency in real-time. Supply-chain management is likewise significant for hierarchical learning. Firms with topographically more broad stock chains interfacing assorted exchanging factions will in general turn out to be more inventive and profitable. Overall, supply chain management provides businesses with many opportunities to increase their profit margins, which is particularly relevant for large and international businesses.

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Records management, significance of network security solutions, relational capital, advantages and disadvantages of individual incentives, socialist feminism, about united nations, define and discuss on retail merchandising, price in economics, the voracious fight for your salad bowl, latest post, power optimizer – a dc to dc converter technology, dc-to-dc converter, coal train pollution exacerbates health risks and inequities, archaeological research demonstrates that humans can boost biodiversity, new uv broadband spectrometer transforms air pollutant analysis, atmospheric circulation.

• Implementing Manufacturing and Supply Chain Materials Management

Guidelines for Updating ABC Assignments

If you're not satisfied with the class into which an item falls as a result of the automatic ABC assignment process, you can change it.

For example, assume you compiled your ABC analysis based on historical usage value. You have a relatively new item in your inventory that was ranked lower in your ABC Classification Set Items report since it has very little transaction history on record. Therefore, after the assignment process, this item was assigned to a class of low rank. However, you know that in the future, this item will have a high usage value and should really be classified as a high rank item. You use the Update ABC Assignments page to reclassify this item to now be a high rank item.

You can also update an ABC group to include those items that weren't a part of the initial ABC classification set. You can expand the scope of your existing ABC classification sets without having to rerun any processes. For example, if you start stocking a new item in your inventory, you can make it a part of your existing ABC groupings through the update process. Otherwise, you would have to start all over by recompiling your ABC analysis and reassigning your items to ABC classes. With the whole process starting from the very beginning, you also run the risk of losing any changes you might have made to your item assignments.

Browse Course Material

Course info.

• Prof. David Simchi-Levi

Departments

• Engineering Systems Division
• Civil and Environmental Engineering

As Taught In

• Operations Management
• Supply Chain Management
• Systems Engineering

Learning Resource Types

Logistics and supply chain management, assignments.

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