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The concept of Supply Chain Management (SCM) was born of the need to transition organizational understanding of the importance of integrating its suppliers into its operations. SCM has been defined in a number of ways, but two of my favorite definitions are:

• The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.
• The integration of business processes from end user through original suppliers that provides products, services and information that add value for customers.

Notice that both of these definitions extend beyond supplier relationships. SCM is about integrating all of the relationships, internal and external, supplier through customer, to deliver a product, service or resource to the end user. To this end, there are several elements that must contribute to effective supply chain management efforts. The four primary functions are:

• Capacity Planning
• Demand Management
• Materials Procurement
• Logistics Delivery

Each of these functions forms a necessary part of the SCM puzzle. Inadequate performance within any one of these functions will most likely result in the failure of the SCM effort. Given the scope of SCM, it should be obvious that the successful management of a project or corporate supply chain management program requires the efforts of multiple departments.

The Procurement department, which has been reclassified as the Supply Chain Management department in many companies, plays a pivotal role in the SCM process, but must be supported by (and support) other functions, including Sales, Logistics, Manufacturing, Accounting and others to be successful. The traditional paradigm of Procurement as an exclusively support function must be replaced by an integrative model in which Procurement (or SCM) plays an active role in defining and managing each of the four critical functions noted above.

The SCM department must ensure that sufficient capacity within the available supply market exists to support Capacity Planning, form alliances or contracts with suppliers in appropriate geographic locations to support Logistics Deliveries, ensure suppliers possess sufficient technological and manufacturing capabilities to satisfy customer demand (Demand Management), and finally execute the Materials Procurement function.

It should be evident from the discussion above that Supply Chain Management spans well beyond simple procurement of goods and services to support operations. SCM is an integral part of operations, extending from the development of supplier relationships and procurement of goods and services, to internal design and manufacturing operations, all the way to the end user or customer.