What is supply chain management?

By Deepak Palasamudram2 min read · Posted Mar 23, 2023


Supply chain management, or SCM, examines the network of how customers receive their goods or services. SCM involves five key components: planning, sourcing, inventory, production & transportation, and returning. Businesses use SCM to determine the most efficient method of converting raw materials into products and how those products can best reach customers. Companies must manage relationships with suppliers, manufacturers, carriers, and inventory managers through SCM to understand their production processes and ensure a smooth network.

Components of Supply Chain Management


Planning is essential to supply chain management. Effective planning helps to optimize the supply chain path and ensure that products and materials are sourced and delivered on time, which can be critical for maintaining customer satisfaction and lowering costs. Furthermore, planning can assist businesses in managing inventory levels, minimizing waste, and ensuring they have the necessary resources and materials to manufacture. Analytics are frequently used in the planning process to assist businesses in making informed decisions and developing effective supply chain strategies.


Sourcing is vital in supply chain management as it is the process of reaching out to vendors or suppliers in an effective manner. When sourcing, companies must make sure that the suppliers are of good reputation and will deliver good quality resources for the manufacturers. With vendors, make sure they are a good company to work with and make sure the contracts made with who you are sourcing with is worth it. It is important to keep a strong relationship between your suppliers and vendors to ensure the best performance for the business.


Managing inventory in supply chain management is essential because it controls the flow and quantity of products and materials throughout the supply chain. Inventory management ensures that businesses have the right amount of inventory at the right time to meet customer demand without overstocking or understocking. It also entails lowering inventory costs, such as holding excess stock.

Production & Transportation

Production management is a critical component of supply chain management that involves supervising the manufacturing and production of goods or services. This includes managing labor and resources to ensure efficient and high-quality product production. Production management also provides quality assurance through testing and inspections. Following the inspection, the products are well packaged to be transported/delivered to various locations by air, rail, and road.


Returning goods or services, also known as reverse logistics, is essential to supply chain management. To maintain customer satisfaction, the company must make the return process as simple as possible when customers return a product due to a defect or for any other reason. Handling returned products, inspecting them for problems, disposing of products, and returning materials to the supplier or manufacturer are all part of the process.


SCM is a vital aspect for a business and its supply chain network to keep costs low, keep customers satisfied, produce good quality products, and meet the supply and demand of the company. The five main components for successful supply chain management areplanning, sourcing, inventory, production & transportation, and returning (reverse logistics).


About The Author

Deepak Palasamudram


Hello, I am Deepak, a high school student and an Article Writer for Pitch Labs. Along with my love of writing and teaching others, I am passionate about entrepreneurship, finance, and coding. I plan to delve more into these subjects in the future.

See more posts by Deepak Palasamudram



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