How does supply chain management work?

According to CIO, there are five components of traditional supply chain management systems:


Plan and manage all resources required to meet customer demand for a company’s product or service. When the supply chain is established, determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers and meets company goals.


Choose suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. Key processes include: ordering, receiving, managing inventory and authorizing supplier payments.


Organize the activities required to accept raw materials, manufacture the product, test for quality, package for shipping and schedule for delivery.

Delivery and Logistics

Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments.


Create a network or process to take back defective, excess or unwanted products.