Supply Chain ManagementNeed for supply Chain Management:•Traditional Approach- Management Functions inisolation, Task Specialization and Local optimization, Plant-Logistics Interface, Logistics –Marketing Interface.•Changes in last two decades•Procurement-Production- DistributionThe term "supply chain management" entered the public domainwhen Keith Oliver, a consultant at Booz Allen Hamilton, usedit in an interview for the Financial Times in 1982. The term wasslow to take hold and the lexicon was slow to change. It gainedcurrency in the mid-1990s, when a flurry of articles and bookscame out on the subject. In the late 1990s it rose to prominenceas a management buzzword, and operations managers began touse it in their titles with increasing regularity.
Definitions• Managing upstream and down stream value added flowof materials, final goods and related information amongsuppliers; company; resellers; final consumers is supplychain management.• Supply chain management is the systematic, strategiccoordination of the traditional business functions andthe tactics across these business functions within aparticular company and across businesses within thesupply chain, for the purposes of improving the long-term performance of the individual companies and thesupply chain as a whole.
• A customer focused definition is given by Hines"Supply chain strategies require a total systems viewof the linkages in the chain that work togetherefficiently to create customer satisfaction at the endpoint of delivery to the consumer. As a consequencecosts must be lowered throughout the chain bydriving out unnecessary costs and focusing attentionon adding value. Throughput efficiency must beincreased, bottlenecks removed and performancemeasurement must focus on total systems efficiencyand equitable reward distribution to those in thesupply chain adding value. The supply chain systemmust be responsive to customer requirements."
• Global supply chain forum - supply chain management isthe integration of key business processes across the supplychain for the purpose of creating value for customers andstakeholders.• According to the Council of Supply Chain ManagementProfessionals (CSCMP), supply chain managementencompasses the planning and management of all activitiesinvolved in sourcing, procurement, conversion, and logisticsmanagement. It also includes the crucial components ofcoordination and collaboration with channel partners, whichcan be suppliers, intermediaries, third-party serviceproviders, and customers. In essence, supply chainmanagement integrates supply and demand managementwithin and across companies. More recently, the looselycoupled, self-organizing network of businesses thatcooperate to provide product and service offerings has beencalled the Extended Enterprise.
• A supply chain, as opposed to supply chainmanagement, is a set of organizations directly linkedby one or more of the upstream and downstreamflows of products, services, finances, and informationfrom a source to a customer. Managing a supply chainis supply chain management (Mentzer et al., 2001).
Six major movements can be observed in the evolution ofsupply chain management studies: Creation, Integration,and Globalization ,Specialization Phases One and Two, andSCM 2.0.Creation era• The term supply chain management was first coinedby Keith Oliver in 1982. However, the concept of asupply chain in management was of great importancelong before, in the early 20th century, especially withthe creation of the assembly line. The characteristicsof this era of supply chain management include theneed for large-scale changes, re-engineering,downsizing driven by cost reduction programs, andwidespread attention to the Japanese practice ofmanagement.
Integration era• This era of supply chain management studies was highlightedwith the development of Electronic Data Interchange (EDI)systems in the 1960s and developed through the 1990s by theintroduction of Enterprise Resource Planning (ERP) systems.This era has continued to develop into the 21st century withthe expansion of internet-based collaborative systems. This eraof supply chain evolution is characterized by both increasingvalue-adding and cost reductions through integration.• In fact a supply chain can be classified as a Stage 1, 2 or 3network. In stage 1 type supply chain, various systems such asMake, Storage, Distribution, Material control, etc. are notlinked and are independent of each other. In a stage 2 supplychain, these are integrated under one plan and is ERP enabled.A stage 3 supply chain is one in which vertical integration withthe suppliers in upstream direction and customers indownstream direction is achieved. An example of this kind ofsupply chain is Tesco.
Globalization era• The third movement of supply chain managementdevelopment, the globalization era, can be characterized bythe attention given to global systems of supplierrelationships and the expansion of supply chains overnational boundaries and into other continents. Although theuse of global sources in the supply chain of organizationscan be traced back several decades (e.g., in the oil industry),it was not until the late 1980s that a considerable number oforganizations started to integrate global sources into theircore business. This era is characterized by the globalizationof supply chain management in organizations with the goalof increasing their competitive advantage, value-adding,and reducing costs through global sourcing.
Specialization era (phase I): outsourced manufacturing anddistribution• In the 1990s, industries began to focus on “core competencies”and adopted a specialization model. Companies abandonedvertical integration, sold off non-core operations, and outsourcedthose functions to other companies. This changed managementrequirements by extending the supply chain well beyondcompany walls and distributing management across specializedsupply chain partnerships.• This transition also re-focused the fundamental perspectives ofeach respective organization. OEMs became brand owners thatneeded deep visibility into their supply base. They had to controlthe entire supply chain from above instead of from within.Contract manufacturers had to manage bills of material withdifferent part numbering schemes from multiple OEMs andsupport customer requests for work -in-process visibility andvendor-managed inventory (VMI).
• The specialization model creates manufacturingand distribution networks composed ofmultiple, individual supply chains specific toproducts, suppliers, and customers who worktogether todesign, manufacture, distribute, market, sell, andservice a product. The set of partners may changeaccording to a given market, region, orchannel, resulting in a proliferation of tradingpartner environments, each with its own uniquecharacteristics and demands.
Specialization era (phase II): supply chainmanagement as a service• Specialization within the supply chain began in the1980s with the inception of transportation brokerages,warehouse management, and non-asset-based carriersand has matured beyond transportation and logisticsinto aspects of supply planning, collaboration,execution and performance management.• At any given moment, market forces could demandchanges from suppliers, logistics providers, locationsand customers, and from any number of thesespecialized participants as components of supply chainnetworks. This variability has significant effects on thesupply chain infrastructure, from the foundation layersof establishing and managing the electroniccommunication between the trading partners to morecomplex requirements including the configuration ofthe processes and work flows that are essential to themanagement of the network itself.
• Supply chain specialization enables companies to improvetheir overall competencies in the same way that outsourcedmanufacturing and distribution has done; it allows them tofocus on their core competencies and assemble networks ofspecific, best-in-class partners to contribute to the overallvalue chain itself, thereby increasing overall performanceand efficiency. The ability to quickly obtain and deploy thisdomain-specific supply chain expertise without developingand maintaining an entirely unique and complexcompetency in house is the leading reason why supply chainspecialization is gaining popularity.• Outsourced technology hosting for supply chain solutionsdebuted in the late 1990s and has taken root primarily intransportation and collaboration categories. This hasprogressed from the Application Service Provider (ASP)model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to theSoftware as a Service (SaaS) model currently in focustoday.
Supply chain management 2.0 (SCM 2.0)• Building on globalization and specialization, the termSCM 2.0 has been coined to describe both thechanges within the supply chain itself as well as theevolution of the processes, methods and tools thatmanage it in this new "era".
• Web 2.0 is defined as a trend in the use of the World WideWeb that is meant to increase creativity, informationsharing, and collaboration among users. At its core, thecommon attribute that Web 2.0 brings is to help navigate thevast amount of information available on the Web in order tofind what is being sought. It is the notion of a usablepathway. SCM 2.0 follows this notion into supply chainoperations. It is the pathway to SCM results, a combinationof the processes, methodologies, tools and delivery optionsto guide companies to their results quickly as thecomplexity and speed of the supply chain increase due tothe effects of global competition, rapid pricefluctuations, surging oil prices, short product lifecycles, expanded specialization, near-/far- and off-shoring, and talent scarcity.
• SCM 2.0 leverages proven solutions designed to rapidlydeliver results with the agility to quickly manage futurechange for continuous flexibility, value and success. This isdelivered through competency networks composed of best-of-breed supply chain domain expertise to understand whichelements, both operationally and organizationally, are thecritical few that deliver the results as well as throughintimate understanding of how to manage these elements toachieve desired results. Finally, the solutions are deliveredin a variety of options, such as no-touch via businessprocess outsourcing, mid-touch via managed services andsoftware as a service (SaaS), or high touch in the traditionalsoftware deployment model.