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What Are the Four

Elements of Supply Chain


Management?
Introduction
According to the Council of Supply Chain Management
Professionals, Supply Chain Management (SCM)
encompasses the planning and management of all
activities involved in sourcing and procurement,
conversion and logistics. In other words, SCM includes
the purchasing, operations, distribution and integration
processes that ensure the efficient production and
delivery of goods and services to end-customers.

Purchasing
The purchasing function, which typically only sources and
buys the materials required for the production or
manufacturing of products, manages the activities and
operations related to the supply of inputs (goods,
materials and services) under SCM.
A supply chain has three primary participants: the
producer, the producers suppliers, and the customers. In
SCM, the purchasing function identifies, qualifies and
manages a companys suppliers.

Operations

The operations function in a supply chain includes


demand planning, forecasting, production, and, in some
types of businesses, inventory management.

Demand Planning
Demand planning improves the effectiveness and
efficiencies of production and inventory management and
provides a forecast of the materials, components and
services needed in future time frames for the purchasing
function. Demand planning is typically an iterative
process that combines sales and production forecasts
that provide informed guidance on future sales, revenues,
inventory levels and perhaps even profitability of the
company.

Forecasting
Within the operations functions of SCM, forecasting is an
integral part of demand planning. Forecasting product
demand is the driver for nearly all activities in most
businesses, especially operations. A sound and realistic
forecast can provide the foundation for accurate demand
planning.

Production
Of course, demand planning produces a plan for what the
manufacturing or operations activities of a company is to
produce or perform. This plan drives the labor, materials,
processing, and shipping requirements of the company.
Often, the production planning based on demand
planning is developed through resource planning
software, such asmaterials requirements
planning (MRP), capacity requirements planning (CRP), or
SCM.

Distribution

This portion of SCM involves the planning, logistics and


delivery of products from a warehouse or production
facility to wholesalers, retailers or end-customers directly.
The distribution function within the SCM model is often
expanded to include packaging, inventory and
warehousing, as well as in-bound shipments of goods and
supplies in some cases.

Integration
Supply Chain Integration (SCI) is the application of
technology to facilitate the close coordination of the SCM
functions, which allows all parties in the supply chain to
see the details of their actions and interactions. SCI also
provides for the analysis historical transactions as a part
of demand, inventory and logistics planning. The key
component of SCI is information and how it is collected,
stored and used.