When we talk about Supply Chain Management, we are talking about how the delivery of goods,
finances and information flow in a continuous process starting from the supplier and
terminating at the consumer level. In between, all these elements will flow between
different parties including the manufacturer, the wholesaler, and then the retailer before
they finally reach the consumer. Thus, in Supply Chain Management, the flow of the elements
has to be organized so that the flow between concerned parties is smooth and uneventful.
For Supply Chain Management to be considered effective, it should culminate with less
inventory at hand so that distressed inventory will not result. (Distressed inventory is
the term describing goods and materials which have reached or are about to reach the level
of deterioration which makes them ineligible for sale afterwards.)
We can subdivide this whole process of flow from supplier up to consumer into three
sub-categories which are, namely, product flow, information flow, and lastly finances flow.
Product flow encompasses the flow of goods as initiated by the supplier and culminating
with receipt by the customer. It also includes any demands by the customer for product
service or returns of the products.
When information flow is being considered, it pertains to sending of orders for the flow
elements (goods, finances and information) and future updates about where these goods are
at any stage in the process.
The last category of financial flow refers to the use of payment schedules, terms of credit,
consignment, and even title ownership stipulations to manage financial information.