supply chain management definition

supply chain management definition

The Importance and Key Concepts of Supply Chain Management

1. Introduction to Supply Chain Management

Initial simple successes are frequently visibility, on-time delivery, improved quality, and reduced cycle time. Long-term objectives are important, however. If the initial improvement is not reasonably well integrated with company and supply chain strategies, these short-term gains tend to disappear over time, usually to a more effective competitor. This chapter is a prime starting point for discussion of supply chain management and summarizes introductory concepts of supply chains and supply chain management, which is essentially the church of logical thinking to which we must become ordained. Its foundation has been constructed by the great logistics, marketing, and operations management scholars. Its function is best summarized by a thought-provoking (and proven) management concept once stated by the famous General Electric leader, Reginald Jones, “The job of any manager anywhere is the same: to make it easy for people to do their job.”

Supply chain management is one of those special innovation initiatives that can have a lasting and deep impact on the companies that use it well. Supply chain management is about creating value – not just for the finished product, but rather for all participants in the supply chain, and for each product this process is unique and highly complex. A successful initiative can bring lasting differentiation and good profitability to product companies, increase global stakeholder satisfaction and return on shareholders’ assets for publicly-owned manufacturing and distribution companies, and bring a global competitive manufacturing or distribution edge to service companies.

2. Key Components of Supply Chain Management

Like the value chain, “link after link” could add value that preexists in the surrounding chain. In chain operation, information and material will freely and effectively flow and connect from the raw material supplier or original design manufacturer (ODM) of components to the customer, whether final customer or intermediate customer in the company or enterprise. Therefore, one of the benefits of the supply-chain partnerships is the enhancement of information flow. It will help the supply chain become more customer-focused and rewrite the supply chain story. So a supply management strategy has to change traditional production management, instead focusing on the market demand and better satisfying the customer’s needs through product and delivery service. Instead of the customer supplying “what we say you need,” the goal is to “sense and respond to customer demand,” and provide customized services through the use of market data.

Demand management, order fulfillment, manufacturing flow management, supplier relationship management, and product development and commercialization. Have you ever deemed these concepts important? They will become the basic and key factors for firms to strive for competitiveness in the future. In addition, some researchers believe that the disproportionate attention on short-term profitability over long-term competitiveness is a significant contributing factor to the erosion of America’s competitive position versus other nations. As a result, most companies and researchers are paying more attention to S&OP collaborative system, agility network, adopting integrated supply-chain, and those most effective supply chain management programs. Through applying these methods to examine firms, managing enterprises could obtain more management data of their firms to improve the working efficiency and operation performance.

3. Challenges and Strategies in Supply Chain Management

Investment to improve the SC of any business depends on how the company sees the SC. If the goal is to increase profit margins, the focus should be on minimizing costs associated with the generation, sale, distribution, and delivery activities. However, if the focus is on rapid responsive management, then the focus areas should be different, namely to satisfy demands with fast and flexible response. Consequently, decision-makers willing to design an effective SC obviously need to understand the main subjective and tangible trade-offs among its members and stages.

3.1 Designing the optimal SC configuration According to Porter (1985), the design of the SC determines its strategic role, especially since physical distribution arrangements often have profound influences on the entire distribution channel, or logical pipeline of goods through which a firm markets its products. Consequently, in order to design an efficient SC, there are important issues to solve such as how many PCs there should be, where they should be located and what mission should each of them have, what types of transportation should be employed, how much inventory should be held in different stages of the SC, and what type of strategic alliances should be established with selected suppliers or customers. An enterprise’s capacity to design and implement a successful SC may deeply influence the achievement of its strategic objectives.

4. Technological Innovations in Supply Chain Management

The context of the above definition implies some critical capabilities required of leading supply chains and resources. In performing the scoped activities with process excellence and driving within monetary and human limitations, these capabilities include an enterprise’s ability to integrate strategically with both upstream and downstream members. To lead beyond these basic requirements, a few additional capabilities are desirable in forming expanded standards in managing the supply chain. These situations involve a powerful orientation towards the consumer, actual management of supply chain planning and execution cycles, and dealing effectively with supply/demand uncertainties. Such augmented supply chain capabilities and the technology that is needed to enable them are discussed below.

Emerging practices are implemented frequently due to the growing complexity of the supply chain, leading to new requirements. Such advanced capabilities and the technology which begins to enable them are discussed in this section. The perceptions of supply chain management and the needs for support that technology contributes to the effective implementation of these new supply chain capabilities are reviewed later. The search for more effective ways to coordinate the strategic plan through the supply chain, and specific business processes has given rise to new and sophisticated ideas. A supply chain that is driven by business strategies is one that responds to customers quickly and at lower costs. It efficiently manages a product’s trade-offs between physical efficiency and responsiveness, even though it sources producing and supplying integrated processes.