1.1 Concepts of Supply Chain Management
A Supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable.
Internal Supply Chain
An illustration of a company's supply chain; the arrows stand for supplier-relationship management, internal SCM and customer-relationship management
In simple words a supply chain consists of all the parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers and customers themselves.
1.2 Definitions of supply chain management
The structure of SCM requires traditionally separate materials functions to report to an executive responsible for coordinating the entire materials process, as well as requiring joint relationships with suppliers across multiple tiers. The authors also argue that a strategic, proactive approach to managing the supply chain is critical for survival beyond the year 2000 because the best supply chain will have a competitive advantage. By the same token, Christopher (1992) argues that the real competitions is not company against company, but rather supply chain against supply chain (Monczka, Trent and Handfield, 1998) .
Compared a supply chain strategy to alliances and partnering strategies and suggested that they generally involve elements including
“Two or more firms in a supply chain entering into a long-term agreement;... the development of trust and commitment to the relationship;... the integration of logistics activities involving the sharing of demand and sales data;... the potential for a shift in the locus of control of the logistics process.” Described by (La Londe and Masters, 1994)
“The objective of managing the supply chain is to synchronize the requirements of the customer with the flow of materials from suppliers in order to effect the balance between what are often seen as conflicting goals of high customer service, low inventory management, and low unit cost,” said by Stevens (1989)
“Supply chain is a concept whose primary objective is to integrate and manage the sourcing, flow, and control of materials using a total systems perspective across multiple functions and multiple tiers of suppliers,” by Monczka and colleagues (1998)
There are some differences between supply chain management and classical materials and manufacturing control described by Houlihan (1998), including
i) The supply chain is viewed as a single process. Responsibility for the various segments in the chain is not fragmented and relegated to functional areas such as manufacturing, purchasing, distribution, and sales.
ii) Supply chain management calls for and in the end depends on strategic decision making. “Supply” is a shared objective of particularly every function in the chain and is of particular strategic significance because of its impact on overall costs and market share.
“Supply chain management deals with the total flow of materials from suppliers through end user, defined by Jones and Riley (1985)”
1) The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as follows: “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,...
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