Supply Chain Management: Push and Pull Based Chains

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SUPPLY CHAIN MANAGEMENT: PUSH AND PULL BASED CHAINS

INTRODUCTION
Fierce competition in today’s global markets, the introduction of products with shorter life cycles, and the heightened expectations of customers have forced business enterprises to invest in, and focus attention on, their supply chains. This, together with continuing advances in communications and transportation technologies (e.g., mobile communication, Internet, and overnight delivery), has motivated the continuous evolution of the supply chain and of the techniques to manage it effectively. The supply chain is a flow of materials, information and money through a network of suppliers, manufacturers, distributors and customers. A supply chain consists of all the stages involved in fulfilling a customer order or requirement. This is a concept increasingly referred to as the extended supply chain, spanning a market or industry sector, from original source to point of consumption. The extended supply chain not only includes manufacturers and suppliers, but also distributors, retailers and end-customers.

A BASIC SUPPLY CHAIN

At the end of a supply chain is the customer and the effectiveness of the supply chain depends on how well the customer is satisfied. Obviously, real world supply chains are much more complicated than that in the figure above.

HISTORY OF THE SUPPLY CHAIN INITIATIVE
The term SCM was originally introduced by management consultants in the early 1980s (Oliver and Webber 1982). Since then several attempts have been made to place contemporary SCM thinking in an historical context and/or to plot its historical development and evolution. The history of the supply chain initiative can be traced to early beginnings in the textile industry with the quick response program and later to efficient consumer response in the grocery industry. More recently a variety of companies across many industries have begun looking at the entire supply chain process. Quick response, for general merchandise retailers and their suppliers Owing to intense competition in the textile and apparel industry world-wide, leaders in the US apparel industry formed the Crafted With Pride in the USA Council in 1984 (Kurt Salmon Associates, Inc., 1993). In 1985, Kurt Salmon Associates were commissioned to conduct a supply chain analysis. The results of the study showed the delivery time for the apparel supply chain, from raw material to consumer, was 66 weeks long, 40 weeks of which were spent in warehouses or in transit. The long supply chain resulted in major losses to the industry due to financing the inventory and lack of the right product in the right place at the right time. The result of this study was the development of the quick response (QR) strategy. QR is a partnership where retailers and suppliers work together to respond more quickly to consumer needs by sharing information. Significant changes as a result of the study were the industry adoption of the UPC code used by the grocery industry and a set of standards for electronic data interchange (EDI) between companies. Retailers began installing point of sale (POS) scanning systems to transfer sales information rapidly to distributors and manufacturers. "QR maximizes the profitability of inventory by placing the company's dollars where and when they are needed based on point of sale data plus sales history" (Mullin, 1994). QR incorporates marketing information on promotion, discounts, and forecasts into the manufacturing and distribution plan. Efficient consumer response, the grocery business initiative In 1992, a group of grocery industry leaders created a joint industry task force called the efficient consumer response (ECR) working group. The group was charged with examining the grocery supply chain to identify opportunities to make the supply chain more competitive (Kurt Salmon Associates Inc., 1993). Kurt Salmon Associates were engaged by the group to examine the grocery supplier/ distributor/consumer...
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