Why Supply Chain Management- A supply chain is basically a group of independent organizations connected together through the products and services that they separately or jointly add value on in order to deliver them to the end customer. The first appearance of the concept of supply chain management was published in the Financial Times article written by Oliver and Webber in 1982. The article described the range of activities performed by the organizations in procuring and managing supplies.There was one more publication on Supply chain but it was mainly focused on purchasing and cost reduction activities. The major development in the area of supply chain came in the 1990s when the supplier-buyer relationship integrated and the concept was gradually established.
The real value of the concept of Supply chain management came when our business environment changed, which includes globalization, more severe competition, heightened customer expectation, technological factors and geographical factors. Under so many changes an organization must understand that their business is only a part of the supply chain that they participate. You “sink or swim with the supply chain”.
Defining Supply Chain-
In simple terms, Supply chain is the product or service that are created by the supply chain for the end customer. In other terms, The supply chain is a network of multiple suppliers and multiple customers for each organization’s departments. In a broad way, Supply chain is defined as a group of inter-connected participating companies that add value to a stream of transformed inputs from their sources of origin to the end products or services that are demanded by the designed end-customers.
There are different types of supply chain connections. The four intrinsic flows of a supply chain are-
- Material Flow-All manufacturing supply chains have material flows from the raw materials at the beginning of the supply chain to the finished products at the end of the chain.
- Information flow- The flow of information are a multitude of information flows such as demand information flow, forecasting information flow and production and scheduling information flows. It can run both directions, which is unique to the supply chain.
- Finance flow- It is the money flow of supply chain. Without it, a supply chain could demise.
- Commercial flow- In the material flow, from supplier to buyer the change in ownership takes place. This is called the transactional commercial flow of goods.
Customer orientation means that customer is not a part of the supply chain. This statement can be supported by following points-
- In supply chain every member in the chain supplies, while the customer doesn’t supply anything. The customer actually demands and receives the supplied products. The fundamental function of the supply chain is to supply and thus a customer can not supply. So the customer can never become a part of supply chain.
- In the supply chain process, very supplier adds a value to the product before transferring it to another supplier, but consumer only consumes or uses the product which actually depletes its value. Thus, the customer does not add any value to the product so he cannot be a part of the supply chain.
- The customer has a diverse buying habit while the suppliers will only buy one type of products and supply that type of products only. Thus, the nature of supply chain can not be understood if customers are added into it.
Thus, Customers are the ultimate objective of a supply chain. The supplier has to reach the customer at the end of the supply chain process otherwise, this chain would be incomplete without actually delivering the product to the customer.
Defining Supply Chain Management-
Supply chain management is simply and ultimately the business management, whatever it may be in its specific context, which is perceived and enacted from the relevant supply chain perspective. For understanding more, there are three supply chain conceptual model.
- Supply chain Configuration- It is the idea that the supply chain is constructed from all its participating firms. This includes the how big is the supply base for OEM, How wide or narrow is the extent of vertical integration, How much of the OEM’s operations are outsourced, and so on. Is is also known as supply chain architecture.
- Supply chain Relationship- It is about inter-firm relationship across the supply chain albeit the key focus of the relationship is often around the OEM and its first tier suppliers and first tier customers and the relationship in between. The decision on supply chain relationship is both strategic and operational.
- Supply chain Coordination- It refers mainly to the inter-firm operational coordination within the supply chain. It involves the coordination of continuous material flows from the suppliers to the buyers and through to the end-consumer in a preferably JIM manner. This decision on the supply chain coordination tends to be operational.
However, there is one common thing among the three conceptual models of the supply chain. That is they all deal with the external organizations in the same supply chain, which makes the concept more supply chain rather than organisationally internal. These concepts also tell us that supply chain management involves managerial decision making across strategic, tactic and operational levels- the pervasiveness.
Three main points are-
- The supply chain is not confined to only material supply. This concept also deals with information, finance, and commercial flow also. This point is important because if the supply chain would only be confined then there won’t be much of an importance to this task in the organisation. But due to its multi-purpose tasks, the organisation’s actually had different departments to handle such tasks.
- Supply chain management is important to make a business success. Supply chain management has become one of the most important tasks that need to be done correctly so the sole objective of the organization can be fulfilled that is customer satisfaction.The customer needs and wants have changed due to which the organizations need supply chain management to keep on updating them about the recent changes in needs of customer that the organisation should work on otherwise they might loose the customer and basically the whole market.
- The last main point is that the value of supply chain has emerged drastically from time to time. The real value of this concept evolved from time to time. We can not say that this is it, there might be other aspects of supply chain management that we still needs to discover by the passing time.
The most interesting point was that the supply chain is basically the value chain from different types of suppliers to the customer who demands the product.
The thing that I would like to explain to the class is the defination of supply chain management which is very complex for everone to understand-
Supply chain management is the management of all the activities involved in the process of moving the products from its manufacturers to the customer. Their may be different types of manufactureres involved before the actually supplier of the product but their is only one customer involved,who is the demand holder of that product.
The confusing part about the whole Customer orietation topic is that I am unable to understand as why Customer is not a part of the supply chain. Customer is the end process that is receiving the goods by the customer.