The average company spends nearly half of every dollar it earns on production needs—goods and services it needs from external suppliers to keep producing. A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

In the past, companies focused primarily on manufacturing and quality improvements within their four walls; now their efforts extend beyond those walls to influence the entire supply chain including customers, customers’ customers, suppliers, and suppliers’ suppliers. Today’s supply chain is a complex web of suppliers, assemblers, logistic firms, sales/marketing channels, and other business partners linked primarily through information networks and contractual relationships. SCM systems enhance and manage the relationships.