Supply Chain
Overview
The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as follows: upply 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 Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.
A typical supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and ever more remote geographical locations, and finally reaching the consumer.
Many of the exchanges encountered in the supply chain will therefore be between different companies that will seek to maximize their revenue within their sphere of interest, but may have little or no knowledge or interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise.
Supply chain modeling
A diagram of a supply chain. The black arrow represents the flow of materials and information and the gray arrow represents the flow of information and backhauls. The elements are (a) the initial supplier, (b) a supplier, (c) a manufacturer, (d) a customer, (e) the final customer.
There are a variety of supply chain models, which address both the upstream and downstream sides.
The SCOR (Supply Chain Operations Reference) model, developed by the Supply Chain Council, measures total supply chain performance. It is a process reference model for supply-chain management, spanning from the supplier’s supplier to the customer’s customer. It includes delivery and order fulfillment performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supply chain.
The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework is built on eight key business processes that are both cross-functional and cross-firm in nature. Each process is managed by a cross-functional team, including representatives from logistics, production, purchasing, finance, marketing and research and development. While each process will interface with key customers and suppliers, the customer relationship management and supplier relationship management processes form the critical linkages in the supply chain.
The American Productivity & Quality Center (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member companies as an open standard to facilitate improvement through process management and benchmarking, regardless of industry, size, or geography. The PCF organizes operating and management processes into 12 enterprise level categories, including process groups and over 1,000 processes and associated activities.
Supply chain management
A German paper factory receives its daily supply of 75 tons of recyclable paper as its raw material
In the 1980s, the term Supply Chain Management (SCM) was developed to express the need to integrate the key business processes, from end user through original suppliers. Original suppliers being those that provide products, services and information that add value for customers and other stakeholders. The basic idea behind the SCM is that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations and production capabilities.
If all relevant information is accessible to any relevant company, every company in the supply chain has the possibility to and can seek to help optimizing the entire supply chain rather than sub optimize based on a local interest. This will lead to better planned overall production and distribution which can cut costs and give a more attractive final product leading to better sales and better overall results for the companies involved.
Incorporating SCM successfully leads to a new kind of competition on the global market where competition is no longer of the company versus company form but rather takes on a supply chain versus supply chain form.
Many electronics manufacturers of Guangdong rely on supply of parts from numerous component shops in Guangzhou
The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labor. In theory, a supply chain seeks to match demand with supply and do so with the minimal inventory. Various aspects of optimizing the supply chain include liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost and transportation, implementing JIT (Just In Time) techniques to optimize manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer markets, and using location/allocation, vehicle routing analysis, dynamic programming and, of course, traditional logistics optimization to maximize the efficiency of the distribution side.
There is often confusion over the terms supply chain and logistics. It is now generally accepted that the term Logistics applies to activities within one company/organization involving distribution of product whereas the term supply chain also encompasses manufacturing and procurement and therefore has a much broader focus as it involves multiple enterprises, including suppliers, manufacturers and retailers, working together to meet a customer need for a product or service.[citation needed]
Starting in the 1990s several companies chose to outsource the logistics aspect of supply chain management by partnering with a 3PL, Third-party logistics provider. Companies also outsource production to contract manufacturers.
There are actually four common Supply Chain Models. Besides the two mentioned above, there are the American Productivity & Quality Center’s (APQC) Process Classification Framework and the Supply Chain Best Practices Framework.
See also
American Production and Inventory Control Society
Cold chain
Council of Supply Chain Management Professionals
C-VARWIP
Demand chain
Demand chain management
Demand optimization
Distribution
Distribution resource planning
Factory Physics
Extended Enterprise
Industrial engineering
Inventory control
Liquid logistics
Logistics
Military supply chain management
Reverse logistics
Supply network
Supply chain management
Supply chain network
Supply chain optimization
Supply Chain Risk Management
Supply chain security
Value chain
Value network
Vertical integration
References
^ Chen, I. J., Paulraj, A. (2004): Towards a theory of supply chain management: the constructs and measurements. In: Journal of Operations Management, 22/2: 119-150
^ Anna Nagurney: Supply Chain Network Economics: Dynamics of Prices, Flows, and Profits, Edward Elgar Publishing, 2006, ISBN 1-84542-916-8
^ “Definition of Terms”. A Management Consultant @ Large. http://jpfarrell.blogspot.com/. Retrieved 2008-02-11.
^ SCC Supply Chain Council, SCOR Model
^ the Supply Chain Management Institute – framework
^ Oliver, R.K., Webber, M.D., 1982, upply-chain management: logistics catches up with strategy, Outlook, Booz, Allen and Hamilton Inc. Reprinted 1992, in Logistics: The Strategic Issues, ed. M Christopher, Chapman Hall, London, pp. 63-75.
^ Selecting a Third Party Logisitcs (3PL) Provider Martin Marray, about.com
External links
Wikimedia Commons has media related to: Supply chain
Glossary of supply chain standards
Supply Chain and Logistics Terms and Glossary
Categories: Commercial item transport and distribution | Distribution, retailing, and wholesaling | Supply chain management | Production and manufacturing | Management | Supply chain management termsHidden categories: All articles with unsourced statements | Articles with unsourced statements from October 2008
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