Supply Chain Management Introduction
Supply Chain Basics is an overview of the concepts of Supply Chain Management and logistics. It demonstrates that product supply chains as varied as bananas to women’s shoes to cement have common supply chain elements. There are many definitions of supply chain management.
But ultimately supply chains are the physical, financial, and information flow between trading partners that ultimately fulfill a customer request. The primary purpose of any supply chain is to satisfy a customer’s need at the end of the supply chain. Essentially supply chains seek to maximize the total value generated as defined as: the amount the customer pays minus the cost of fulfilling the need along the entire supply chain. All supply chains include multiple firms.
Logistics vs Supply Chain Management
According to the Council of Supply Chain Management Professionals…
• Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.
• Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
Supply chains can be viewed in many different perspectives including process cycles (Chopra & Meindl 2013) and the SCOR model (Supply Chain Council).
The Supply Chain Process has four Primary Cycles: Customer Order Cycle, Replenishment Cycle, Manufacturing Cycle, and Procurement Cycle, Not every supply chain contains all four cycles.
The Supply Chain Operations Reference (SCOR) Model is another useful perspective. It shows the four major operations in a supply chain: source, make, deliver, plan, and return.
Additional perspectives include:
• Geographic Maps – showing origins, destinations, and the physical routes.
• Flow Diagrams – showing the flow of materials, information, and finance between echelons.
• Macro-Process or Software – dividing the supply chains into three key areas of management: Supplier Relationship, Internal, and Customer Relationship.
• Traditional Functional Roles – where supply chains are divided into separate functional roles (Procurement, Inventory Control, Warehousing, Materials Handling, Order Processing, Transportation, Customer Service, Planning, etc.). This is how most companies are organized.
• Systems Perspective – where the actions from one function are shown to impact (and be impacted by) other functions. The idea is that you need to manage the entire system rather than the individual siloed functions. As one expands the scope of management, there are more opportunities for improvement, but the complexity increases dramatically.
Supply Chain as a System
It is useful to think of the supply chain as a complete system. This means one should:
• Look to maximize value across the supply chain rather than a specific function such as transportation.
• Note that while this increases the potential for improvement, complexity and
coordination requirements increase as well.
• Recognize new challenges such as:
o Metrics — how will this new system be measured?
o Politics and power — who gains and loses influence, and what are the effects
o Visibility — where data is stored and who has access
o Uncertainty — compounds unknowns such as lead times, customer demand, and manufacturing yield
o Global Operations — most firms source and sell across the globe Supply chains must adapt by acting as both a bridge and a shock absorber to connect functions as well as neutralize disruptions.