Origin of the term and definitions:
Supply chain management was then extra defined as the integration of supply chain behavior through improved supply chain relations to achieve a competitive advantage. In the late 1990s, supply chain management SCM rose to importance, and operations managers began to use it in their titles with increasing regularity .Other commonly accepted definitions of supply chain management include: The management of upstream and downstream value added flows of materials, final goods, and related in order among suppliers, company, resellers, and final consumers. The logical strategic coordination of traditional business functions and tactics across all business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole A customer-focused. Supply chain strategies require a total systems view of the links in the chain that work together efficiently to make customer agreement at the end point of delivery to the consumer.
Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization certain aspects of the internal processing of materials into finished goods, and the group of finished goods out of the organization and toward the end consumer.
First, as an outcome of globalization and the creation of multinational companies, joint ventures, strategic alliances, and business partnerships, significant success factors were identified, complementing the earlier just in time lean manufacturing, and agile manufacturing practices. Second, technological changes, particularly the dramatic fall in communication costs a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network Coase 1998.
Many researchers have recognized supply network structures as a new organisational form, using terms such as Keiretsu total Enterprise Virtual Corporation Global Production Network, and Next Generation Manufacturing System. In general, such a structure can be defined as a group of semi independent organizations each with their capabilities which collaborate in ever changing constellations to serve one or more markets in order to achieve some business aim specific to that collaboration Akkermans 2001.
Organizations increasingly find that they must rely on effective supply chains or networks to compete in the global market and networked economy. In Peter Drucker’s 1998 new management paradigms this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a worth chain of multiple companies.
The uniqueness of this era of supply chain management include the need for large scale changes re engineering, downsizing driven by cost reduction programs, and widespread attention to Japanese management practices.
However, the term became widely adopted after the publication of the seminal book Introduction to Supply Chain Management in 1999 by Robert B.
However the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line.
The term supply chain management was first coined by Keith Oliver in 1982.
This era of supply chain management studies was highlighted with the development of electronic data interchange EDI systems in the 1960s, and developed through the 1990s by the introduction of enterprise resource planning ERP systems.
In a stage 1 type supply chain, systems such as production, storage, distribution, and material control are not linked and are independent of each other.
In a stage 2 supply chain, these are integrated under one plan and enterprise resource planning ERP is enabled.
The third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains beyond national boundaries and into other continents.
This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, adding value, and reducing costs through global sourcing.
Although the use of global source in organisations’ supply chains can be traced back several decades e.g., in the oil industry, it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business.
Specialization era (phase I): outsourced manufacturing and distribution
The specialization model creates modern and distribution networks composed of several individual supply chains specific to producers, suppliers, and customers that work together to design, manufacture, distribute, market, sell, and service a product.
Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work in-process visibility and vendor managed inventory VMI.
Specialization era (phase II): supply chain management as a service
Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done it allows them to focus on their core competencies and assemble networks of specific, best in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency.
Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management storage and inventory and non asset based carriers, and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution, and performance management.
This variability has significant effects on supply chain infrastructure, from the foundation layers of establishing and managing electronic communication between trading partners, to more complex requirements such as the configuration of processes and work flows that are essential to the management of the network itself.
The ability to quickly get and deploy this domain specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is a leading reason why supply chain specialization is gaining popularity.
Supply chain management 2.0 (SCM 2.0)
It is the pathway to SCM results, a combination of processes, methodologies, tools, and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to global competition; rapid price fluctuations; changing oil prices; short product life cycles; expanded specialization; near-, far-, and off-shoring; and talent scarcity.
The growing popularity of collaborative platforms is highlighted by the rise of TradeCard’s supply chain collaboration platform, which connects multiple buyers and suppliers with financial institutions, enabling them to conduct automated supply-chain finance transactions. Web 2.0 is a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users.
This is delivered through competency networks composed of best-of-breed supply chain expertise to understand which elements, both operationally and organizationally, deliver results, as well as through intimate understanding of how to manage these elements to achieve the desired outcome.
Business process integration:
According to Lambert and Cooper 2000, managers of the product development and commercialization process must: coordinate with customer relationship management to identify customer-articulated needs; select materials and suppliers in conjunction with procurement; and develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the given combination of product and markets.
The key supply chain processes stated by Lambert 2004 are: Customer relationship management Customer service management Demand management style Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management Much has been written about demand management.
Best-in-class companies have similar characteristics, which include the following: Internal and external collaboration Initiatives to reduce lead time Tighter feedback from customer and market demand Customer-level forecasting One could suggest other critical supply business processes that combine these processes stated by Lambert, such as: Customer service management process Customer relationship management concern the relationship between an organization and its customers.
Successful organizations use the following steps to build customer relationships: determine mutually satisfying goals for organization and customers establish and maintain customer rapport induce positive feelings in the organization and the customers Procurement process Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the development of new products.
Procurement has recently been familiar as a core source of value, driven largely by the increasing trends to outsource products and services, and the changes in the global ecosystem requiring stronger relationships between buyers and sellers. Product development and commercialization Here, customers and suppliers must be integrated into the product development process in order to reduce the time to market.
Wal-Mart realized that in order for it to ensure steadiness in the quality of the products it offers g to the consumers and also maintains a steady supply of goods in its stores at a lower cost, it had to create strategic vendor partnerships with the suppliers Cmuscm, 2014.
To cut these costs, Wall-Mart decided to do away with intermediaries in the supply chain and started direct sourcing of its goods from the suppliers.
This strategy of direct sourcing not only helped Wal-Mart in reducing the costs in the supply chain but also helped in the improvement of supply chain activities through boosting efficiency throughout the entire process.
Creation of procurement centers- Wal-Mart adopted this strategy of sourcing through centralizing the entire process of procurement and sourcing by setting up four global merchandizing points for general goods and clothing.
Thus, Wal-Mart through direct sourcing manages to get the exact product quality as it expects since it engages the suppliers in the producing of these products hence quality consistency Lu, 2014.
Thus, centralization of the procurement process to various points where the suppliers would be meeting with the procurement team is the latest strategy which the company is implementing and signs show that this strategy is going to cut costs and also improve the efficiency of the procumbent process.
Wal-Mart managed to source directly 80%v profit its stock and this has greatly eliminated the intermediaries and cut down the costs between 5-15% as markups that are introduced by these middlemen in the supply chain hence saving approximately $4-15 billion Cmuscm, 2014.
Lambert and Cooper 2000 identified the following components: Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure Risk and reward structure Culture and attitude However, a more careful examination of the existing literature leads to a more comprehensive understanding of what should be the key critical supply chain components, or branches of the previously identified supply chain business processes that is, what kind of relationship the workings may have that are related to suppliers and customers.
93 that is, which supply chain components should be viewed as primary or secondary, how these components should be structured in order to achieve a more comprehensive supply chain structure, and how to examine the supply chain as an integrative one See above sections 2.1 and 3.1. Reverse supply chain Reverse logistics is the process of managing the return of goods.
Systems and value:
Co-creating value and sharing the benefits appropriately to encourage effective participation is a key challenge for any supply system.
Supply chain systems configure value for those that organize the networks.
Supply and value chain trends include: Globalization Increased cross-border sourcing Collaboration for parts of value chain with low-cost providers Shared service centers for logistical and administrative functions Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums Complex problems involve also midsized companies to an increasing degree These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments e.g., culture, infrastructure, special tax zones, or sophisticated OEM for their products