Supply chains

Globalization and the evolution of information technology have provided the catalysts for supply chain management to become the strategic means for companies to manage quality, satisfy customers, and remain competitive. A supply chain encompasses all activities associated with the flow and transformation of goods and services from the raw materials stage to the end user (customer), as well as associated information flows.

The idea of supply chain is managing flow:

• Flow of products or material
• Flow of informations
• Flow of money

The supply chain management is all about managing those three flows in order to minimize costs, maximize profit, improve level of service to customers.

The supply chain is the facilities, functions, and activities involved in producing and delivering a product or service from suppliers (and their suppliers) to customers (and their customers)

Supply chain management is a fundamentally different philosophy of business organization and is based upon the idea of partnership in the marketing channel and a high degree of linkage between entities in that channel. Traditional models of business organization were based upon the notion that the interests of individual firms are best served by maximizing their revenues and minimizing their costs. If these goals were achieved by disadvantaging another entity in the channel, then that was the way it was. Under the supply chain management model the goal is to maximize profit through enhanced competitiveness in the final market – a competitiveness that is achieved by a lower cost to serve, achieved in the shortest time-frame possible. Such goals are only attainable if the supply chain as a whole is closely coordinated in order that total channel inventory is minimized, bottlenecks are eliminated, time-frames com- pressed and quality problems eliminated.

This new model of competition suggests that individual companies compete not as company against company, but rather as supply chain against supply chain. Thus the successful companies will be those whose supply chains are more cost-effective than those of their competitors.

What are the basic requirements for successful supply chain management? Figure 1.2 outlines the critical linkages that connect the marketplace to the supply chain.

The key linkages are between procurement and manufacturing, and between manufacturing and distribution. Each of these three activities, while part of a continuous process, has a number of critical elements.