SUPPLY CHAIN MANAGEMENT
EXECUTIVE MBA - JKUAT
DISCUSS THE SUPPLY CHAIN MANAGEMENT PARADIGM AND ITS APPLICATION TO THE SERVICE AND MANUFACTURING INDUSTRY
The concept of Supply Chain Management is based on two broad ideas.
The first is that practically all goods and services that reach an end user represent the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain.
The second idea is that while supply chains have existed for a long time, few businesses understood, let alone managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains.
There as many and varied definitions of supply chain management as are the authors. Broadly defined, supply chain management, is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a deliberate effort by the supply chain firms to develop and run supply chains in the more effective and efficient ways possible.
The Institute of Supply Management describes supply chain management as “the design and management of seamless, value added processes across organizational boundaries to meet the needs of the end customer. The development and integration of people and technologies or resources are critical to the successful supply chain management”
The Supply Chain Council defines it as “managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels and delivery to the customer”
The Council of Logistics Management defines supply chain management as the “systematic, strategic coordination, of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purpose of improving long term performance of the individual companies and the supply chain as a whole.”
OBJECTIVE OF THE SUPPLY CHAIN NAD SUPPLY CHAIN MANAGEMENT
Organizations exist to make, maintain and increase profits and to generate sufficient funds in order to achieve and maintain both liquidity and solvency. This is wealth maximization.
The objective of every supply chain is a build up form the above. It is to maximize the overall value generated. The value is the supply chain profitability or surplus, which is basically the difference between the revenue generated from the customer and the overall cost across the supply chain. This profitability is measured in terms of the supply chain whole and not individual stages in the chain (as individual stages may lead to a reduction in the overall supply chain profitability).
Profitability will not make sense if looked at in isolation from costs. To generate profits in a supply chain, there is constant flow of: •
Information – transmitting orders and updating the status of delivery •
product - movement of goods or services from a supplier to a customer •
funds – payment, credit, finance and consignment arrangements.
These flows generate costs within the supply chain. It is the effective management of these flows which is key to the supply chain success. Effective supply chain management involves the management of supply chain assets products, information and funds flow to maximize supply chain profitability.
According to an internet article on supply chain management , the major objectives of supply chain management are to: •
Provide an uninterrupted flow of materials, supplies and services required to operate the organisation •
Minimize inventory investment and loss
Maintain and improve quality
Create relationships with competent suppliers
Set standards for...
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