A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Supply chain management, then, is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.
The organizations that make up the supply chain are “linked” together through physical flows and information flows. Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain.
Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.
1.1 Supply Chain
All stages involved, directly or indirectly, in fulfilling a customer request are called supply chain. It includes manufacturers, suppliers, transporters, warehouses, retailers, and customers. Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service). Customer is an integral part of the supply chain. It includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions. It is more accurate to use the term “supply network” or “supply web”.
1.2 Flows in a Supply Chain
1.3 Supply chain stages:
All stages may not be present in all supply chains. So, Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability.
1.4 The Goal of a Supply Chain
1. Maximize overall value created:
Supply chain value is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request. Value is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain).
2. Maximize total supply chain profitability:
Supply chain incurs costs (information, storage, transportation, components, assembly, etc.). Supply chain profitability is total profit to be shared across all stages of the supply chain. Supply chain success should be measured by total supply chain profitability, not profits at an individual stage. Sources of supply chain revenue: the customer Sources of supply chain cost: flows of information, products, or...