Competitiveness in today’s marketplace depends heavily on the ability of a company to handle the several important challenges like reducing total supply chain operating cost and reducing lead-times, increasing customer service levels, and improving product quality.
In Figure a typical non integral supply chain is shown, in which the goods flow starts as raw materials at natural resources and ends with products at final customers. Raw material winners keep raw materials on stock and supply them to component manufacturers. Component manufacturers have an inventory of materials at the start of the production process and an inventory of components at the end. Product manufacturers hold inventories of products and components, the latter being supplied by component manufacturers. Wholesalers buy products from product manufacturers and hold central and regional stock in central and regional distribution centres respectively. Retailers get their supply from wholesalers and have products in local stock for sales to final customers. In today’s world, most supply chains still do not profit from supply chain management from natural resources to final customers.
1.1 SUPPLY CHAIN MANAGEMENT
In early 1990s, the phrase “supply chain management” came in to use . In today’s global market, managing the entire supply chain becomes key factor for the successful business. World-Class organizations now realize that non-integrated manufacturing processes, non-integrated distribution processes and poor relationship with suppliers and customers are inadequate for their success. The challenges facing business organizations grow rapidly because of the globalization of commerce, global distribution of manufacturing and warehousing facilities, rapid commoditization of products, demand for customized products, competitive pressures, rapid advances of information technology, etc. The task of getting the right product to the right customer at the right place and at the right time is not easy, and this task leads to the study on ‘supply chain’. Supply Chain Management (SCM) is a relatively new term. It crystallizes concepts about integrated business planning that have been espoused by logistics experts, strategists, and operations research practitioners as far back as the 1950’s. The challenges facing business organizations continue to grow rapidly due to the globalization of commerce, rapid commoditization of products, demand for customized products, global distribution of manufacturing and warehousing facilities, etc. All these factors have driven business organizations to concentrate on their supply chains so as to gain competitive advantage in the market place. The ability to manage the complete Supply Chain Network (SCN) and to optimize decisions is increasingly being recognized as a crucial competitive factor in order to make good decisions within a SCN. In today’s competitive world, the success of an industry is contingent upon the management of its supply chain. The global economy and the recent developments in information technology have significantly modified the business organization of enterprises and the way that they do business. New forms of organizations such as extended enterprises and virtual enterprises turn to appear and they are quickly adopted by most leading enterprises
Definition of Supply Chain Management
Simchi-Levi et al. (2000) defined supply chain management as a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed at the right quantities, to the right location and at the right time in order to minimize system-wide cost, while satisfying service level requirements. Supply chain is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed...
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