Operations Management

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JOURNALOF BUSINESS LOGISTICS.Voi22.No.2,2001

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DEFINING SUPPLY CHAIN MANAGEMENT

by JohnT. Mentzer The University of Tennessee William DeWitt The University of Maryland James S. Keebler St. Cloud State University Soonhong Min Georgia Southern University Nancy W. Nix Texas Christian University Carlo D. Smith The University of San Diego and Zach G. Zacharia Texas Christian University "Management is on the verge of a major breakthrough in understanding how industrial company success depends on the interactions between the flows of information, materials, money, manpower, and capital equipment. The way these five flow systems interlock to amplify one another and to cause change and fluctuation will form the basis for anticipating the effects of decisions, policies, organizational forms, and investment choices." (Forrester 1958. p. 37} Forrester introduced a theory of distribution management that recognized the integrated nature of organizational relationships. Because organizations are so intertwined, he argued that system dynamics can influence the performance of functions such as research, engineering, sales, and promotion.

MENTZER. DeWrrr, KEEBLER, MIN, NIX, SMITH, AND ZACHARIA

He illustrated this phenomena utilizing a computer simulation of order information flow and its influence on production and distribution perfomiance for each supply chain member, as well as the entire supply chain system. More recent replications of this phenomenon include the "Beer Game" simulation and research covering the "Bullwhip Effect" (Lee. Padmanabhan. and Whang 1997). Discussing the shape of the future, Forrester (1958, p. 52) proposed that after a period of research and development involving basic analytic techniques, "there will come genera! recognition of the advantage enjoyed by the pioneering management who have been the first to improve their understanding ofthe interrelationships between separate company functions and between the company and its markets, its industry, and the national economy." Though his article is more than forty years old, it appears that Forrester identified key management issues and illustrated the dynamics of factors associated with the phenomenon referred to in contemporary business literature as Supply Chain Management (SCM). The term supply chain management has risen to prominence over the past ten years (Cooper et al. 1997). For example, atthe i 995 Annual Conference ofthe Council ot Logistics Management. 13.5% of the concurrent session titles contained the words "supply chain." At the 1997 conference, just two years later, the number of sessions containing the term rose to 22.4%. Moreover, the term is frequently used to describe executive responsibilities in corporations (La Londe 1997). SCM has become such a "hot topic" that it is difficult to pick up a periodical on manufacturing, distribution, marketing, customer management, or transportation without seeing an article about SCM or SCM-related topics (Ross 1998). There are many reasons for the popularity ofthe concept. Specific drivers may be traced to trends in global sourcing, an emphasis on time and quality-based competition, and their respective contributions to greater environmental uncertainty. Corporations have turned increasingly lo global sources for their supplies. This globalization of supply has forced companies to look for more efl'ective ways to coordinate the flow of materials into and out of the company. Key to such coordination is an orientation toward closer relationships with suppliers. Further, companies in particular and supply chains in general compete more today on the basis of time and quality. Getting a defect-free product to the customer faster and more reliably than the competition is no longer seen as a competitive advantage, but simply a requirement to be in the market. Customers are demanding products consistently delivered faster, exactly on time, and with no damage. Each of these necessitates closer...
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