What is Supply Chain Management?

Supply chain management (SCM) is the central organization of a company's production resources and materials intended to streamline the production process and reduce costs on a continuing basis.

How Does Supply Chain Management Work?

A company's production operation contains material input components, each of which incurs a cost which is recovered in the price of the finished product. Much of market competition is based on keeping the prices of finished products as low as possible without sacrificing quality. For this reason, supply chain management (SCM) attempts to bridge this gap effectively by closely monitoring the cost a company pays for materials and from whom the materials are being procured. In addition, SCM monitors the operational procedures from start to finish in order to identify costly and unnecessary procedural steps.

Why Does Supply Chain Management Matter?

The activities comprised in SCM help a company to increase the efficiency of its production cycle while placing downward pressure on its costs as safeguard to maintain, and, where possible, increase profitability.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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