A supply chain, logistics network, or supply network is a coordinated system of
organizations, people, activities, information and resources involved in moving a product or service in physical or
virtual manner from supplier to customer. Supply chain activities (aka value chains or life cycle processes) transform raw materials and components into a
finished product that is delivered to the end customer. Supply chains link value chains.[1]
Today, the ever increasing technical complexity of the distribution of standard consumer goods, combined with the ever
increasing size and depth of the global market has meant that the link between consumer and vendor is usually only the final link
in a long and complex chain or network of exchanges.
This supply chain begins with the extraction of raw material and includes several production links, for instance; component
construction, assembly and merging before moving onto several layers of storage facilities of ever decreasing size and ever more
remote geographical locations, and finally reaching the consumer.
Although many companies and corporations today are of importance not just on national or regional but also on global scale,
none are of a size that enables them to control the entire supply chain, since no existing company controls every link from raw
material extraction to consumer.
Many of the exchanges encountered in the supply chain will therefore be between different companies who will all generally
seek to maximize company revenue within their sphere of interest but will have little or no basic knowledge or interest in the
remaining players in the supply chain except those to which it is directly linked.
There are a variety of supply chain models, which address both the upstream and downstream sides.
The SCOR (Supply Chain Operations Reference) model, developed by
the Supply Chain Council measures total supply chain performance. It is a process reference model for supply-chain management,
spanning from the supplier's supplier to the customer's customer.[2]. It includes delivery and order fulfillment performance, production flexibility, warranty and returns
processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supply
chain.
The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework
[3] is built on eight key business processes that are both
cross-functional and cross-firm in nature. Each process is managed by a cross-functional team, including representatives from
logistics, production, purchasing, finance, marketing and research and development. While each process will interface with key
customers and suppliers, the customer relationship management and supplier relationship management processes form the critical
linkages in the supply chain.
The eight key processes are:
In the 1980s the term Supply Chain Management (SCM) was developed, to express
the need to integrate the key business processes, from end user through original suppliers. Original suppliers being those that
provide products, services and information that add value for customers and other stakeholders. The basic idea behind the SCM is
that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations,
production capabilities.
If all relevant information is accessible to any relevant company, every company in the supply chain has the possibility to
and can seek to help optimizing the entire supply chain rather than sub optimize based on a local interest. This will lead to
better planned overall production and distribution which can cut costs and give a more attractive final product leading to better
sales and better overall results for the companies involved.
Incorporating SCM successfully leads to a new kind of competition on the global market where competition is no longer of the
company versus company form but rather takes on a supply chain versus supply chain form.
The primary objective of supply chain management is to fulfill customer
demands through the most efficient use of resources, including distribution capacity, inventory and labor. Various aspects of optimizing the supply chain include liasising with suppliers to
eliminate bottlenecks; implementing JIT techniques to optimize manufacturing flow; and using location/allocation, vehicle routing
analysis, Dynamic programming and, of course, traditional logistics optimization to maximise the efficiency of the distribution side.
Starting in the 1990s several companies choose to outsource their supply chain management by partnering with a 3PL,
Third-party logistics provider.
References
- ^ Anna Nagurney: Supply Chain Network
Economics: Dynamics of Prices, Flows, and Profits, Edward Elgar Publishing, 2006, ISBN 1-84542-916-8
- ^ SSC Supply
Chain Council, SCOR Model
- ^ the Supply Chain Management Institute - framework
See also
External links
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
