Supply Chain Management System Basics

Supply chain management systems have not only become a popular concept in MBA programs, but an essential means by which businesses manage their operations. While supply chain management systems sound like a complicated process, they don't have to be that way. Basically, supply chain management systems refer to the process through which a company determines how exactly to source a product or service. Whether your business is a service-based business or a product-based business, your company will want to complete each phase of the supply chain management system, which is as follows:

- Creation of Service/Product Specifications: Obviously, the company must determine the exact product or services for which the supply chain management system will be necessary before starting the process. During this discussion, clear requirements and quality standards should be decided and documented.

- Determining Who Will Supply the Service/Product: Once the service/product specifications have been identified through the first step in the supply chain management system, the company must determine who (and how) the service/product will be sourced. Sourcing should be determined based upon who can meet the above product requirements, taking price and schedule into account.

- Determining the Price of the Service/Product: If an outside supplier is needed to source the product, then the purchasing team will have to negotiate with the supplier to determine how much the product cost will be. These negotiations have most likely begun during the second determination phase of the supply chain management system.

- Ensuring that the Product/Service is Completed Properly: The final step in the supply chain management system is that it must decided whether the product/service that has provided has met the predefined quality standards, as well as meeting both schedule and price targets.

This supply chain management system can be used for simple sourcing choices, such as what a person should buy for dinner that evening, or for more complex decisions, such as purchasing multi-million equipment for a large corporation. A simple supply chain management decision, such as the dinner, can be made more quickly, and by a single person or small group of people. However, when making a large sourcing decision, many people with a variety of skill sets, such as purchasing, engineering and product development, will have to weigh in to determine the optimum supply chain management system. These people form the supply chain management team and they are all crucial components of the supply chain management system.