Essentials of Supply Chain Management

Key Concepts of Supply Chain Management

Definitions of supply chain:
 A supply chain is the alignment of firms that bring products or services to market.
 A supply chain consists of all stages involved, directly or indirectly, in fulfilling a
customer request. The supply chain not only includes the manufacturer and suppliers,
but also transporters, warehouses, retailers, and customers themselves.
 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 this finished products to
customers.

Definitions of supply chain management:

 The systemic, strategic coordination of the traditional business functions and the
tactics across these functions within a particular company and across business within
the supply chain, for the purposes of improving the long-term performance of the
individual companies and the supply chain as a whole.
 Supply chain management is the coordination of production, inventory, location and
transportation among the participants in a supply chain to achieve the best mix of
responsiveness and efficiency for the market being served.

Logistics typically refers to activities that occur within the boundaries of a single organization
and supply chains refer to networks of companies that work together and coordinate their
actions to deliver a product to market.

Effective supply chain management requires simultaneous improvements in both customer

service levels and the internal operating efficiencies of the companies in the supply chain.

Companies in any supply chain must take decisions individually regarding their actions in five
areas, simplified are:
 Production: includes the creation of master production schedules that tale into
account plant capacities, workload balancing, quality control and equipment
maintenance.
 Inventory: act as a buffer against uncertainty in the supply chain.
 Location: determine the possible paths available for product to flow through delivery
to the final consumer.
 Transportation: shipping by sea or rail is much less expensive but usually involves
longer transit times and more uncertainty, this uncertainty must be compensated for
by stocking higher levels of inventory.
 Information: with good information, people can take effective decisions about what to
produce and how much, about where to locate inventory and how best to transport it.

Production. Refers to the capacity of the supply chain to make and store products. Factories
can be built to accommodate one of two approaches to manufacturing: Product focus
(performs the range of different operations required to make a given product of different
product parts, tends to result in developing expertise about a given set of products);
Functional focus (concentrates on performing just a few operations such as only making a
select group of parts, these functions can be applied to making many different kinds of
products, results in expertise about particular functions).