Supply chain
Overview
 
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier
Vendor (supply chain)
A vendor, or a supplier, is a supply chain management term meaning anyone who provides goods or services to a company. A vendor often manufactures inventoriable items, and sells those items to a customer.- History :...

 to customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...

. Supply chain activities transform natural resources, raw material
Raw material
A raw material or feedstock is the basic material from which a product is manufactured or made, frequently used with an extended meaning. For example, the term is used to denote material that came from nature and is in an unprocessed or minimally processed state. Latex, iron ore, logs, and crude...

s and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable.
Encyclopedia
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier
Vendor (supply chain)
A vendor, or a supplier, is a supply chain management term meaning anyone who provides goods or services to a company. A vendor often manufactures inventoriable items, and sells those items to a customer.- History :...

 to customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...

. Supply chain activities transform natural resources, raw material
Raw material
A raw material or feedstock is the basic material from which a product is manufactured or made, frequently used with an extended meaning. For example, the term is used to denote material that came from nature and is in an unprocessed or minimally processed state. Latex, iron ore, logs, and crude...

s and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...

s.

Overview

The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as follows: “Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.”

A typical supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and ever more remote geographical locations, and finally reaching the consumer.

Many of the exchanges encountered in the supply chain will therefore be between different companies that will seek to maximize their revenue within their sphere of interest, but may have little or no knowledge or interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise
Extended Enterprise
An extended enterprise is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market...

.

Supply chain modeling

There are a variety of supply chain models, which address both the upstream and downstream sides. However the SCOR model is most common.

The SCOR Supply-Chain Operations Reference
Supply-Chain Operations Reference
Supply-chain operations reference-model is a process reference model developed by the management consulting firm PRTM and endorsed by the Supply-Chain Council as the cross-industry de-facto standard diagnostic tool for supply chain management...

 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. 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 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 American Productivity & Quality Center (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member companies as an open standard to facilitate improvement through process management and benchmarking, regardless of industry, size, or geography. The PCF organizes operating and management processes into 12 enterprise level categories, including process groups, and over 1,000 processes and associated activities.

Supply chain management

In the 1980s, the term Supply Chain Management
Supply chain management
Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...

 (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
Conjuncture
In general, a conjuncture is a period marked by some watershed event which separates different epochs.In economics, conjuncture is a critical combination of events....

 and 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
Supply chain management
Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...

 is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory
Inventory
Inventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...

 and labor. In theory, a supply chain seeks to match demand with supply and do so with the minimal inventory. Various aspects of optimizing the supply chain include liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost and transportation, implementing JIT (Just In Time) techniques to optimize manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer markets, and using location/allocation, vehicle routing analysis, dynamic programming
Dynamic programming
In mathematics and computer science, dynamic programming is a method for solving complex problems by breaking them down into simpler subproblems. It is applicable to problems exhibiting the properties of overlapping subproblems which are only slightly smaller and optimal substructure...

 and, of course, traditional logistics
Logistics
Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...

 optimization to maximize the efficiency of the distribution side.

There is often confusion over the terms supply chain and logistics. It is now generally accepted that the term Logistics applies to activities within one company/organization involving distribution of product whereas the term supply chain also encompasses manufacturing and procurement and therefore has a much broader focus as it involves multiple enterprises, including suppliers, manufacturers and retailers, working together to meet a customer need for a product or service.

Starting in the 1990s several companies chose to outsource the logistics aspect of supply chain management by partnering with a 3PL, Third-party logistics provider
Third-party logistics provider
A third-party logistics provider is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions....

. Companies also outsource production to contract manufacturers. Technology companies have risen to meet the demand to help manage these complex systems.

There are actually four common Supply Chain Models. Besides the two mentioned above, there are the American Productivity & Quality Center's (APQC) Process Classification Framework and the Supply Chain Best Practices Framework

An unusual food supply chain operated by Dabbawalas in Mumbai
Mumbai
Mumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...

 is noted for being extremely reliable without using any computers or modern technology. It has been verified to be a six sigma
Six Sigma
Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...

 supply chain.

Regulations

Supply chain security has become particularly important in recent years. As a result, supply chains are often subject to global and local regulations. Several major regulations emerged in 2010 alone that have had a lasting impact on how global supply chains operate. These new regulations include: The Importer Security Filing (ISF)
10 + 2
United States Customs and Border Protection has announced a new rule, known as the Importer Security Filing or more commonly called 10+2; which requires cargo information, for security purposes, to be transmitted to the agency at least 24 hours before goods are loaded onto an ocean vessel for...

 additional provisions of the Certified Cargo Screening Program (CCSP) .

Development and design

With increasing globalization and easier access to alternative products in today’s markets, the importance of product design in demand generation is more significant than ever. In addition, as supply, and therefore competition, among companies for the limited market demand increases and pricing and other marketing elements become less distinguishing factors, product design also plays a different role by providing attractive features to generate demand. In this context, demand generation is used to define how attractive a product design is in terms of creating demand.

In other words, it is the ability of a product design to generate demand by satisfying customer expectations. However, product design impacts not only demand generation, but also manufacturing processes, cost, quality, and lead time. The product design affects the associated supply chain and its requirements directly including, but not limited to: manufacturing, transportation, quality, quantity, production schedule, material selection, production technologies, production policies, regulations, and laws. From a broad perspective, the success of the supply chain depends on the product design and the capabilities of the supply chain, but the reverse is also true—the success of the product depends on the supply chain that produces it.

Since the product design dictates multiple requirements on the supply chain, as mentioned previously, it is clear that once a product design is completed, it drives the structure of the supply chain, limiting the flexibility of the engineers to generate and evaluate different (potentially more cost effective) supply chain alternatives.

See also

  • American Production and Inventory Control Society
  • Chemicals, Tire, and Process Industries (CTP)
    Chemicals, Tire, and Process Industries (CTP)
    Chemical, Tire, and Process Industry Segment is a critical component of the manufacturing space that processes raw materials into finished goods and intermediate products...

  • Cold chain
    Cold chain
    A cold chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range...

  • Council of Supply Chain Management Professionals
    Council of Supply Chain Management Professionals
    The Council of Supply Chain Management Professionals is the leading worldwide association of professionals in supply chain management. The CSCMP is a non-profit association that provides leadership in the development, design and improvement in occupations that deal with logistics and management of...

  • Demand chain
    Demand chain
    -Concept:Analysing the firm's activities as a linked chain is a tried and tested way of revealing value creation opportunities. The business economist Michael Porter of Harvard Business School pioneered this value chain approach: "the value chain disaggregates the firm into its strategically...

  • Demand chain management
    Demand chain management
    Demand chain management is the management of upstream and downstream relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. The term demand chain management is used to denote the concept commonly referred to as...

  • Demand optimization
    Demand Optimization
    Demand optimization is the application of processes and tools to maximize return on sales. This usually involves the application of mathematical modeling techniques using computer software....

  • Document automation
    Document automation
    Document automation is the design of systems and workflow that assist in the creation of electronic documents. These include logic based systems that use segments of pre-existing text and/or data to assemble a new document. This process is increasingly used within certain industries to assemble...

     in supply chain management & logistics
  • Distribution
    Distribution (business)
    Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...

  • Distribution resource planning
    Distribution Resource Planning
    Distribution resource planning is a method used in business administration for planning orders within a supply chain. DRP enables the user to set certain inventory control parameters and calculate the time-phased inventory requirements...

  • Factory Physics
    Factory Physics
    Factory Physics is a book written by Wallace Hopp and Mark Spearman, which introduces a framework for manufacturing management. According to the book's preface, Factory Physics is "a systematic description of the underlying behavior of manufacturing systems...

  • Extended Enterprise
    Extended Enterprise
    An extended enterprise is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market...

  • Industrial engineering
    Industrial engineering
    Industrial engineering is a branch of engineering dealing with the optimization of complex processes or systems. It is concerned with the development, improvement, implementation and evaluation of integrated systems of people, money, knowledge, information, equipment, energy, materials, analysis...

  • Inventory control
    Inventory control
    Inventory control is the supervision of supply, storage and accessibility of items in order to ensure an adequate supply without excessive oversupply....

  • Last mile (transportation)
    Last mile (transportation)
    Last mile is a term used in supply chain management and transportation planning to describe the movement of people and goods from a transport hub to a final destination.-Usage in distribution networks:...

  • Liquid logistics
    Liquid Logistics
    Liquid Logistics is a special category of logistics that relates to liquid products, and is used extensively in the "Supply Chain for Liquids" discipline....

  • Logistics
    Logistics
    Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...

  • Military supply chain management
    Military Supply Chain Management
    Military supply chain management is a cross-functional approach to procuring, producing and delivering products and services. The broad management scope includes sub-suppliers, suppliers, internal information and funds flow.-Supply:...

  • Nomenclature
    Nomenclature
    Nomenclature is a term that applies to either a list of names or terms, or to the system of principles, procedures and terms related to naming - which is the assigning of a word or phrase to a particular object or property...

  • Reverse logistics
    Reverse logistics
    Reverse logistics stands for all operations related to the reuse of products and materials. It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption...

  • Supply network
    Supply network
    A supply network is a pattern of temporal and spatial processes carried out at facility nodes and over distribution links, which adds value for customers through the manufacturing and delivery of products...

  • Supply chain management
    Supply chain management
    Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...

  • Supply chain network
    Supply chain network
    Due to the rapid advancement of technology such as pervasive or ubiquitous wireless and internet networks, connective product marking technologies like RFID and emerging standards for the use of these defining specific locations using Global Location Number, the basic supply chain is rapidly...

  • Supply-Chain Operations Reference
    Supply-Chain Operations Reference
    Supply-chain operations reference-model is a process reference model developed by the management consulting firm PRTM and endorsed by the Supply-Chain Council as the cross-industry de-facto standard diagnostic tool for supply chain management...

     Model
  • Supply chain optimization
    Supply chain optimization
    Supply chain optimization is the application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating costs...

  • Supply Chain Risk Management
    Supply Chain Risk Management
    Supply chain risk management is a discipline of risk management which attempts to identify potential disruptions to continued manufacturing production and thereby commercial financial exposure.- Supply chain exposures :...

  • Supply chain security
    Supply chain security
    Supply chain security refers to efforts to enhance the security of the supply chain: the transport and logistics system for the world's cargo. It combines traditional practices of supply chain management with the security requirements of the system, which are driven by threats such as terrorism,...

  • Value chain
    Value chain
    The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...

  • Value network
    Value network
    A value network is a business analysis perspective that describes social and technical resources within and between businesses. The nodes in a value network represent people . The nodes are connected by interactions that represent tangible and intangible deliverables. These deliverables take the...

  • Vertical integration
    Vertical integration
    In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...


External links

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