What is supply chain management - who is concerned with it?


Supply chain management is often studied in conjunction with purchasing and procurement. This is because supply chain management and purchasing are concerned with many of the same objectives however the focus of supply chain management may be seen as wider and often more long term and strategic than traditional purchasing decisions.
A supply chain management approach will involve working with other firms throughout the supply chain to improve performance. Firms may interact with other firms in the supply chain at all levels throughout the operations, not merely on the purchasing and sales interface.
Supply chain management has however introduced many ideas which have been embraced by purchasing and which have been partly responsible for enhancing the status of purchasing in many businesses due to new strategic considerations, knowledge, skills techniques and expertise required of the purchasing function. (The development of the purchasing function to accommodate ideas of supply chain management will be considered in section 9 when we have looked more at the ideas of supply chain management).

Lysons (chapter 3 Section 8h 5th edition) summarises the 1997 findings of the Bourton Consulting Group’s survey on responsibility for supply chain management issues. This survey found that specific responsibility for the supply chain was headed by a dedicated director in 15% of responding companies and by a specific manager in another 45%. In only 16% of cases did reporting responsibility lie below director level. This suggests that supply chain management issues are awarded strategic attention often at a high level.

Under Porter’s view of the value chain, supply chain management would be concerned with strategic management of the structuring of the value chain and the co-ordination of the activities within it.
Supply chain management recognizes that competitive advantage depends on activities within the firm and also outside the firm, within the supply chain, both upstream (on the supply side) and downstream on the business's demand side. Furthermore competitive advantage also depends upon the linkages and relationships between these activities both internally and externally.
Thus Supply management concerns itself with the development of strategies for the role and positioning the organization in the supply chain, configuration of the wider supply chain, the actual activities of the supply chain and the linkages and co-ordination between theses activities.
Lysons uses the analogy of a relay race to invoke a sense of the importance of co-ordination and a shared goal within the supply chain:
'The Supply chain can be likened to a well balanced and practised relay team in which the entire team is co-ordinated to run the race”
Supply chain management recognises that the supply chain is not a fixed set of linear connections between buyer and supplier but is a dynamic entity whose evolution should be managed for competitive advantage. A pro-active approach to managing the evolution of the supply chain is often referred to as ‘supply chain re-engineering’. Supply chain management thus also attempts to orchestrate the configuration of the supply chain for combined competitive advantage of the whole supply chain.

A major consideration facing the individual business will be its choice of position in the supply chain. This decision will be considered in depth later in this section.

The need for a holistic view of supply chain competitiveness for competitive advantage has led to greater concern for the business’s environment and external relationships. Managing value creation in other parts of the supply chain and relationships with other parts of the supply chain are given strategic recognition. In a competitive environment where product life cycles are short and the winner is often the first to market with a new idea, innovation is key. Supply chain management recognises that innovation may occur anywhere in the supply chain and thus the success of one business is very dependent upon innovation occurring in other parts of the supply chain. Stimulation of innovation in the supply chain is therefore a further key concern of supply chain management. New ideas may emanate from any point in the supply chain so a business should be concerned that its entire supply chain benefits from such innovation wherever it occurs and whether it be in product, design or process.

Managing costs in the supply chain is a key factor to competitive advantage of the supply chain. Flint (Logistics focus 1997) suggests that there are 5 supply cost areas where cost savings can be made.

Business process costs Documentation, order processing and other administration. Such costs are often decreased by implementation of computer automation. We will look at some of these technologies in later sections.

Procurement costs Managing actual price of the item, the time and paperwork and communications expense involved in serving the internal customer. A procurement service in a firm is only worthwhile if it reduces procurement costs.

Production costs These include costs of labour, machines, and other overheads and set up time costs.

Inventory carrying costs Inventory may be carried in work in progress, raw materials and bought in supplies or finished goods. Such inventory represents costs to the organisation as capital is tied up in the inventory and opportunity cost of this capital (money earned on investing it elsewhere) is foregone. There are also costs of storage space and maintaining storage conditions, costs of shrinkage if this inventory is damaged, stolen or becomes obsolete. (Inventory, why it is needed and the costs of will be considered in more detail in section 2).

Storage handling and Packing, transporting, loading, transit time, insurance, distribution costs shrinkage, costs of depots.

The objectives of supply chain management are however broader than cost management. Quality and value added by activities in the supply chain, innovation, environmental and ethical awareness, efficient customer response are all strategic areas for supply chain management.
In summary the objectives of supply chain management may be said to include:
Objectives

- Strategic firm positioning within the supply chain,
- Seamless integration material and information flows within the supply chain.
- Relationships between firms in the supply chain and sharing of and encouragement of innovation and best practices within all organisations in the supply chain to create networks of best of breed enterprises.

- Internal and external optimisation of activities, of value added, quality and cost.

- Collective competitive advantage of the supply chain to meet the customer’s quality requirements at the right time, in the right place, in the right quantity at a lower cost than competing supply chains.


in conjunction with
بالتعاون مع, بالاشتراك مع

Due to
بسبب, نتيجة لـ

Linkage -the existence or forming of connections between two things so that one thing happening or changing depends on the other thing happening or changing

concerns itself with
شغل نفسه بـ

Positioning
وضع, موقع

Configuration
تركيبة

analogy
التمثيل - تشبيه

Invoke
يستحضر

Liken
يشبه

Source: Svuonline.org
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