According to Thomas Friedman in The World is Flat, supply chain management has become a source of competitive advantage and profit in a flat world. He has quoted Wal-Mart’s ability of moving 2.3 billion general merchandise cartons a year down its supply chain into its stores as an example of creating value. Global supply chains that draw parts and producers from every corner of the world, from the best producers at the lowest price, are the way how to beat competitors and stay in the business.
Yossi Sheffi, an expert on supply chain management and a professor of engineering system at MIT, was quoted in Friedman (2006) as saying, “Making stuff – that’s easy. Supply chain, now that is really hard” (pp.152). Sheffi also stressed that, making these chains work is much harder than it looks and requires constant innovation and constant adjustment.
What is Supply Chain Management (SCM)?
There are many definitions of what a supply chain is. Knolmayer, Mertens and Zeier (2002) refer to the integration of all key business process across the supply chain as SCM. Dr. Roger D. Blackwell, professor of marketing at Ohio State University and author of the best-selling book, "From Mind to Market," defines SCM succinctly as "Supply chain management is all about having the right product in the right place, at the right price, at the right time and in the right condition."
Other definitions of SCM are summarised in the table below:
Monczka, Trent, and Handfield (1998)
SCM requires traditionally separate materials functions to report to an executive responsible for coordinating the entire materials process, and also requires joint relationships with suppliers across multiple tiers. SCM 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.” La Londe and Masters (1994)Supply chain strategy includes: “... 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.” Stevens (1989)“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 a balance between what are often seen as conflicting goals of high customer service, low inventory management, and low unit cost.” Houlihan (1988)Differences between supply chain management and classical materials and manufacturing control: “1) 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. 2) Supply chain management calls for, and in the end depends on, strategic decision making. “Supply” is a shared objective of practically every function in the chain and is of particular strategic significance because of its impact on overall costs and market share. 3) Supply chain management calls for a different perspective on inventories which are used as a balancing mechanism of last, not first, resort. 4) Anew approach to systems is required—integration rather than interfacing.” Jones and Riley (1985)“Supply chain management deals with the total flow of materials from suppliers through end users...” Cooper et al. (1997)Supply chain management is “... an integrative philosophy to manage the total flow of a distribution channel from supplier to the ultimate user.”
Table 1: Definitions of SCM
Source: Mentzer, J.T., DeWitt, W., Keebler, J. S., Min, S.H., Nix, N. W., Smith, C.D. and Zacharia, Z. G. (2001)
Knolmayer et. al. (2002) espouse that SCM can be relevant at three different organizational levels: •...