A supply chain is an extended system that includes an organizations value chain as well as its suppliers, distributors, and consumers, and consists of all parties directly or indirectly involved in fulfilling a customer request. Supply chains are often made up a team of companies who work together to improve their efficiency and effectiveness in fulfilling consumer requests as well as adding value to the consumer. In doing so, companies are able to lower their individual costs and increase profits.

An example of a supply chain can be observed when a customer purchases a computer online from Dell Computer website, the immediate thought is that the supply chain consists of the customer’s order and the Dell computer website. However, the supply chain also consists of the Dell assembly plant, Dell’s suppliers and their suppliers, and other parts of the Dell company including, but not limited to marketing, finance, and customer service. The consumer and Dell Computer are not the only two involved in the production of the product. Dell could be purchasing parts from different suppliers from parts of the world.

When Dell Computer purchases parts from different suppliers from different parts of the world to build their computers, they are using Supply Chain Management (SCM). SCM manages things like materials, information, and finances as they are distributed from supplier to consumer. The main objectives of SCM is to maximize value to the ultimate consumer.

Related Terms: Bullwhip Effect, Value Chain, Global Inventory Management System