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Supply chain management


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Supply chain management

  1. 1. Supply chain managementFrom Wikipedia, the free encyclopediaJump to: navigation, search This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (August 2009)Supply chain management (SCM) is the managementof a network of interconnected businesses involved inthe ultimate provision of product and service packagesrequired by end customers (Harland, 1996).[1] Supplychain management spans all movement and storage ofraw materials, work-in-process inventory, and finishedgoods from point of origin to point of consumption(supply chain).Another definition is provided by the APICS Dictionarywhen it defines SCM as the "design, planning,execution, control, and monitoring of supply chainactivities with the objective of creating net value,building a competitive infrastructure, leveragingworldwide logistics, synchronizing supply with demandand measuring performance globally."Contents[hide] 1 Definitions
  2. 2. 2 Problems addressed by supply chain management 3 Activities/functions o 3.1 Strategic level o 3.2 Tactical level o 3.3 Operational level 4 Importance of supply chain management 5 Historical developments in supply chain management 6 Supply chain business process integration 7 Theories of supply chain management 8 Supply chain centroids 9 Tax efficient supply chain management 10 Supply chain sustainability 11 Components of supply chain management integration 12 Supply chain systems and value 13 Global supply chain management 14 See also 15 References 16 Further reading 17 External links[edit] DefinitionsMore common and accepted definitions of supply chainmanagement are: Supply chain management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions
  3. 3. within a particular company and across businesseswithin the supply chain, for the purposes ofimproving the long-term performance of theindividual companies and the supply chain as awhole (Mentzer et al., 2001).[2]A customer focused definition is given by Hines(2004:p76) "Supply chain strategies require a totalsystems view of the linkages in the chain that worktogether efficiently to create customer satisfactionat the end point of delivery to the consumer. As aconsequence costs must be lowered throughout thechain by driving out unnecessary costs andfocusing attention on adding value. Throughputefficiency must be increased, bottlenecks removedand performance measurement must focus on totalsystems efficiency and equitable rewarddistribution to those in the supply chain addingvalue. The supply chain system must be responsiveto customer requirements." [3]Global supply chain forum - supply chainmanagement is the integration of key businessprocesses across the supply chain for the purposeof creating value for customers and stakeholders(Lambert, 2008).[4]According to the Council of Supply ChainManagement Professionals (CSCMP), supply chainmanagement encompasses the planning andmanagement of all activities involved in sourcing,
  4. 4. procurement, conversion, and logistics management. It also includes the crucial components of 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. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.A supply chain, as opposed to supply chainmanagement, is a set of organizations directly linked byone or more of the upstream and downstream flows ofproducts, services, finances, and information from asource to a customer. Managing a supply chain issupply chain management (Mentzer et al., 2001).[5]Supply chain management software includes tools ormodules used to execute supply chain transactions,manage supplier relationships and control associatedbusiness processes.Supply chain event management (abbreviated asSCEM) is a consideration of all possible events andfactors that can disrupt a supply chain. With SCEMpossible scenarios can be created and solutions devised.[edit] Problems addressed by supply chainmanagement
  5. 5. Supply chain management must address the followingproblems: Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner- operated, private carrier, common carrier, contract carrier, or 3PL). Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs
  6. 6. which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy. Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management: Quantity and location of inventory, including raw materials, work-in- progress (WIP) and finished goods. Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.Supply chain execution means managing andcoordinating the movement of materials, informationand funds across the supply chain. The flow is bi-directional.[edit] Activities/functionsSupply chain management is a cross-function approachincluding managing the movement of raw materials intoan organization, certain aspects of the internalprocessing of materials into finished goods, and themovement of finished goods out of the organization andtoward the end-consumer. As organizations strive tofocus on core competencies and becoming moreflexible, they reduce their ownership of raw materials
  7. 7. sources and distribution channels. These functions areincreasingly being outsourced to other entities that canperform the activities better or more cost effectively.The effect is to increase the number of organizationsinvolved in satisfying customer demand, while reducingmanagement control of daily logistics operations. Lesscontrol and more supply chain partners led to thecreation of supply chain management concepts. Thepurpose of supply chain management is to improve trustand collaboration among supply chain partners, thusimproving inventory visibility and the velocity ofinventory movement.Several models have been proposed for understandingthe activities required to manage material movementsacross organizational and functional boundaries. SCORis a supply chain management model promoted by theSupply Chain Council. Another model is the SCMModel proposed by the Global Supply Chain Forum(GSCF). Supply chain activities can be grouped intostrategic, tactical, and operational levels . The CSCMPhas adopted The American Productivity & QualityCenter (APQC) Process Classification FrameworkSM ahigh-level, industry-neutral enterprise process modelthat allows organizations to see their business processesfrom a cross-industry viewpoint.[6][edit] Strategic level
  8. 8. Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities. Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics. Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities. Information technology chain operations. Where-to-make and make-buy decisions. Aligning overall organizational strategy with supply strategy. It is for long term and needs resource commitment.[edit] Tactical level Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition. Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. Milestone payments.
  9. 9. Focus on customer demand and Habits.[edit] Operational level Daily production and distribution planning, including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. Inbound operations, including transportation from suppliers and receiving inventory. Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities, warehousing and transportation to customers. Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.[edit] Importance of supply chain management
  10. 10. Organizations increasingly find that they must rely oneffective supply chains, or networks, to compete in theglobal market and networked economy.[7] In PeterDruckers (1998) new management paradigms, thisconcept of business relationships extends beyondtraditional enterprise boundaries and seeks to organizeentire business processes throughout a value chain ofmultiple companies.During the past decades, globalization, outsourcing andinformation technology have enabled manyorganizations, such as Dell and Hewlett Packard, tosuccessfully operate solid collaborative supplynetworks in which each specialized business partnerfocuses on only a few key strategic activities (Scott,1993). This inter-organizational supply network can beacknowledged as a new form of organization. However,with the complicated interactions among the players,the network structure fits neither "market" nor"hierarchy" categories (Powell, 1990). It is not clearwhat kind of performance impacts different supplynetwork structures could have on firms, and little isknown about the coordination conditions and trade-offsthat may exist among the players. From a systemsperspective, a complex network structure can bedecomposed into individual component firms (Zhangand Dilts, 2004). Traditionally, companies in a supplynetwork concentrate on the inputs and outputs of theprocesses, with little concern for the internalmanagement working of other individual players.
  11. 11. Therefore, the choice of an internal management controlstructure is known to impact local firm performance(Mintzberg, 1979).In the 21st century, changes in the businessenvironment have contributed to the development ofsupply chain networks. First, as an outcome ofglobalization and the proliferation of multinationalcompanies, joint ventures, strategic alliances andbusiness partnerships, significant success factors wereidentified, complementing the earlier "Just-In-Time","Lean Manufacturing" and "Agile Manufacturing"practices.[8] Second, technological changes, particularlythe dramatic fall in information communication costs,which are a significant component of transaction costs,have led to changes in coordination among the membersof the supply chain network (Coase, 1998).Many researchers have recognized these kinds ofsupply network structures as a new organization form,using terms such as "Keiretsu", "Extended Enterprise","Virtual Corporation", "Global Production Network",and "Next Generation Manufacturing System".[9] Ingeneral, such a structure can be defined as "a group ofsemi-independent organizations, each with theircapabilities, which collaborate in ever-changingconstellations to serve one or more markets in order toachieve some business goal specific to thatcollaboration" (Akkermans, 2001).
  12. 12. The security management system for supply chains isdescribed in ISO/IEC 28000 and ISO/IEC 28001 andrelated standards published jointly by ISO and IEC.[edit] Historical developments in supply chainmanagementSix major movements can be observed in the evolutionof supply chain management studies: Creation,Integration, and Globalization (Movahedi et al., 2009),Specialization Phases One and Two, and SCM 2.0.1. creation eraThe term supply chain management was first coinedby a U.S. industry consultant in the early 1980s.However, the concept of a supply chain in managementwas of great importance long before, in the early 20thcentury, especially with the creation of the assemblyline. The characteristics of this era of supply chainmanagement include the need for large-scale changes,re-engineering, downsizing driven by cost reductionprograms, and widespread attention to the Japanesepractice of management.2. integration eraThis era of supply chain management studies washighlighted with the development of Electronic DataInterchange (EDI) systems in the 1960s and developedthrough the 1990s by the introduction of EnterpriseResource Planning (ERP) systems. This era has
  13. 13. continued to develop into the 21st century with theexpansion of internet-based collaborative systems. Thisera of supply chain evolution is characterized by bothincreasing value-adding and cost reductions throughintegration.In fact a supply chain can be classified as a Stage 1, 2 or3 network. In stage 1 type supply chain, varioussystems such as Make, Storage, Distribution, Materialcontrol, etc are not linked and are independent of eachother. In a stage 2 supply chain, these are integratedunder one plan and is ERP enabled. A stage 3 supplychain is one in which vertical integration with thesuppliers in upstream direction and customers indownstream direction is achieved. An example of thiskind of supply chain is Tesco.3. globalization eraThe third movement of supply chain managementdevelopment, the globalization era, can be characterizedby the attention given to global systems of supplierrelationships and the expansion of supply chains overnational boundaries and into other continents. Althoughthe use of global sources in the supply chain oforganizations can be traced back several decades (e.g.,in the oil industry), it was not until the late 1980s that aconsiderable number of organizations started tointegrate global sources into their core business. Thisera is characterized by the globalization of supply chainmanagement in organizations with the goal of
  14. 14. increasing their competitive advantage, value-adding,and reducing costs through global sourcing.4. specialization era—phase one: outsourcedmanufacturing and distributionIn the 1990s, industries began to focus on “corecompetencies” and adopted a specialization model.Companies abandoned vertical integration, sold offnon-core operations, and outsourced those functions toother companies. This changed managementrequirements by extending the supply chain wellbeyond company walls and distributing managementacross specialized supply chain partnerships.This transition also re-focused the fundamentalperspectives of each respective organization. OEMsbecame brand owners that needed deep visibility intotheir supply base. They had to control the entire supplychain from above instead of from within. Contractmanufacturers had to manage bills of material withdifferent part numbering schemes from multiple OEMsand support customer requests for work -in-processvisibility and vendor-managed inventory (VMI).The specialization model creates manufacturing anddistribution networks composed of multiple, individualsupply chains specific to products, suppliers, andcustomers who work together to design, manufacture,distribute, market, sell, and service a product. The set ofpartners may change according to a given market,
  15. 15. region, or channel, resulting in a proliferation of tradingpartner environments, each with its own uniquecharacteristics and demands.5. specialization era—phase two: supply chainmanagement as a serviceSpecialization 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 toimprove their overall competencies in the same waythat outsourced manufacturing and distribution hasdone; it allows them to focus on their corecompetencies and assemble networks of specific, best-
  16. 16. in-class partners to contribute to the overall value chainitself, thereby increasing overall performance andefficiency. The ability to quickly obtain and deploy thisdomain-specific supply chain expertise withoutdeveloping and maintaining an entirely unique andcomplex competency in house is the leading reason whysupply chain specialization is gaining popularity.Outsourced technology hosting for supply chainsolutions debuted in the late 1990s and has taken rootprimarily in transportation and collaboration categories.This has progressed from the Application ServiceProvider (ASP) model from approximately 1998through 2003 to the On-Demand model fromapproximately 2003-2006 to the Software as a Service(SaaS) model currently in focus today.6. supply chain management 2.0 (SCM 2.0)Building on globalization and specialization, the termSCM 2.0 has been coined to describe both the changeswithin the supply chain itself as well as the evolution ofthe processes, methods and tools that manage it in thisnew "era".Web 2.0 is defined as a trend in the use of the WorldWide Web that is meant to increase creativity,information sharing, and collaboration among users. Atits core, the common attribute that Web 2.0 brings is tohelp navigate the vast amount of information availableon the Web in order to find what is being sought. It is
  17. 17. the notion of a usable pathway. SCM 2.0 follows thisnotion into supply chain operations. It is the pathway toSCM results, a combination of the processes,methodologies, tools and delivery options to guidecompanies to their results quickly as the complexity andspeed of the supply chain increase due to the effects ofglobal competition, rapid price fluctuations, surging oilprices, short product life cycles, expandedspecialization, near-/far- and off-shoring, and talentscarcity. This article appears to contain a large number of buzzwords. Specific concerns can be found on the Talk page. Please improve this article if you can.SCM 2.0 leverages proven solutions designed to rapidlydeliver results with the agility to quickly manage futurechange for continuous flexibility, value and success.This is delivered through competency networkscomposed of best-of-breed supply chain domainexpertise to understand which elements, bothoperationally and organizationally, are the critical fewthat deliver the results as well as through intimateunderstanding of how to manage these elements toachieve desired results. Finally, the solutions aredelivered in a variety of options, such as no-touch viabusiness process outsourcing, mid-touch via managedservices and software as a service (SaaS), or high touchin the traditional software deployment model.[edit] Supply chain business process integration
  18. 18. Successful SCM requires a change from managingindividual functions to integrating activities into keysupply chain processes. An example scenario: thepurchasing department places orders as requirementsbecome known. The marketing department, respondingto customer demand, communicates with severaldistributors and retailers as it attempts to determineways to satisfy this demand. Information sharedbetween supply chain partners can only be fullyleveraged through process integration.Supply chain business process integration involvescollaborative work between buyers and suppliers, jointproduct development, common systems and sharedinformation. According to Lambert and Cooper (2000),operating an integrated supply chain requires acontinuous information flow. However, in manycompanies, management has reached the conclusionthat optimizing the product flows cannot beaccomplished without implementing a process approachto the business. The key supply chain processes statedby Lambert (2004) [10] are: Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management
  19. 19. Much has been written about demand management.Best-in-Class companies have similar characteristics,which include the following: a) Internal and externalcollaboration b) Lead time reduction initiatives c)Tighter feedback from customer and market demand d)Customer level forecastingOne could suggest other key critical supply businessprocesses which combine these processes stated byLambert such as: a. Customer service management b. Procurement c. Product development and commercialization d. Manufacturing flow management/support e. Physical distribution f. Outsourcing/partnerships g. Performance measurementa) Customer service management processCustomer Relationship Management concerns therelationship between the organization and its customers.Customer service is the source of customer information.It also provides the customer with real-time informationon scheduling and product availability throughinterfaces with the companys production anddistribution operations. Successful organizations use thefollowing steps to build customer relationships: determine mutually satisfying goals for organization and customers
  20. 20. establish and maintain customer rapport produce positive feelings in the organization and the customersb) Procurement processStrategic plans are drawn up with suppliers to supportthe manufacturing flow management process and thedevelopment of new products. In firms whereoperations extend globally, sourcing should be managedon a global basis. The desired outcome is a win-winrelationship where both parties benefit, and a reductionin time required for the design cycle and productdevelopment. Also, the purchasing function developsrapid communication systems, such as electronic datainterchange (EDI) and Internet linkage to conveypossible requirements more rapidly. Activities related toobtaining products and materials from outside suppliersinvolve resource planning, supply sourcing, negotiation,order placement, inbound transportation, storage,handling and quality assurance, many of which includethe responsibility to coordinate with suppliers onmatters of scheduling, supply continuity, hedging, andresearch into new sources or programs.c) Product development and commercializationHere, customers and suppliers must be integrated intothe product development process in order to reduce timeto market. As product life cycles shorten, theappropriate products must be developed and
  21. 21. successfully launched with ever shorter time-schedulesto remain competitive. According to Lambert andCooper (2000), managers of the product developmentand commercialization process must: 1. coordinate with customer relationship management to identify customer-articulated needs; 2. select materials and suppliers in conjunction with procurement, and 3. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.d) Manufacturing flow management processThe manufacturing process produces and suppliesproducts to the distribution channels based on pastforecasts. Manufacturing processes must be flexible torespond to market changes and must accommodatemass customization. Orders are processes operating ona just-in-time (JIT) basis in minimum lot sizes. Also,changes in the manufacturing flow process lead toshorter cycle times, meaning improved responsivenessand efficiency in meeting customer demand. Activitiesrelated to planning, scheduling and supportingmanufacturing operations, such as work-in-processstorage, handling, transportation, and time phasing ofcomponents, inventory at manufacturing sites andmaximum flexibility in the coordination of geographic
  22. 22. and final assemblies postponement of physicaldistribution operations.e) Physical distributionThis concerns movement of a finished product/serviceto customers. In physical distribution, the customer isthe final destination of a marketing channel, and theavailability of the product/service is a vital part of eachchannel participants marketing effort. It is also throughthe physical distribution process that the time and spaceof customer service become an integral part ofmarketing, thus it links a marketing channel with itscustomers (e.g., links manufacturers, wholesalers,retailers).f) Outsourcing/partnershipsThis is not just outsourcing the procurement ofmaterials and components, but also outsourcing ofservices that traditionally have been provided in-house.The logic of this trend is that the company willincreasingly focus on those activities in the value chainwhere it has a distinctive advantage, and outsourceeverything else. This movement has been particularlyevident in logistics where the provision of transport,warehousing and inventory control is increasinglysubcontracted to specialists or logistics partners. Also,managing and controlling this network of partners andsuppliers requires a blend of both central and localinvolvement. Hence, strategic decisions need to be
  23. 23. taken centrally, with the monitoring and control ofsupplier performance and day-to-day liaison withlogistics partners being best managed at a local level.g) Performance measurementExperts found a strong relationship from the largest arcsof supplier and customer integration to market shareand profitability. Taking advantage of suppliercapabilities and emphasizing a long-term supply chainperspective in customer relationships can both becorrelated with firm performance. As logisticscompetency becomes a more critical factor in creatingand maintaining competitive advantage, logisticsmeasurement becomes increasingly important becausethe difference between profitable and unprofitableoperations becomes more narrow. A.T. KearneyConsultants (1985) noted that firms engaging incomprehensive performance measurement realizedimprovements in overall productivity. According toexperts, internal measures are generally collected andanalyzed by the firm including 1. Cost 2. Customer Service 3. Productivity measures 4. Asset measurement, and 5. Quality.External performance measurement is examinedthrough customer perception measures and "best
  24. 24. practice" benchmarking, and includes 1) customerperception measurement, and 2) best practicebenchmarking.h) Warehousing managementAs a case of reducing company cost & expenses,warehousing management is carrying the valuable roleagainst operations. In case of perfect storing & officewith all convenient facilities in company level, reducingmanpower cost, dispatching authority with on timedelivery, loading & unloading facilities with properarea, area for service station, stock management systemetc.Components of supply chain management are asfollows: 1. Standardization 2. Postponement 3.Customization[edit] Theories of supply chain managementCurrently there is a gap in the literature available onsupply chain management studies: there is notheoretical support for explaining the existence and theboundaries of supply chain management. A few authorssuch as Halldorsson, et al. (2003), Ketchen and Hult(2006) and Lavassani, et al. (2009) have tried to providetheoretical foundations for different areas related tosupply chain by employing organizational theories.These theories include: Resource-Based View (RBV)
  25. 25. Transaction Cost Analysis (TCA) Knowledge-Based View (KBV) Strategic Choice Theory (SCT) Agency Theory (AT) Institutional theory (InT) Systems Theory (ST) Network Perspective (NP) Materials Logistics Management (MLM) Just-in-Time (JIT) Material Requirements Planning (MRP) Theory of Constraints (TOC) Total Quality Management (TQM) Agile Manufacturing Time Based Competition (TBC) Quick Response Manufacturing (QRM) Customer Relationship Management (CRM) and many more[edit] Supply chain centroidsIn the study of supply chain management, the conceptof centroids has become an important economicconsideration. A centroid is a place that has a highproportion of a country’s population and a highproportion of its manufacturing, generally within500 mi (805 km). In the U.S., two major supply chaincentroids have been defined, one near Dayton, Ohio anda second near Riverside, California.The centroid near Dayton is particularly importantbecause it is closest to the population center of the US
  26. 26. and Canada. Dayton is within 500 miles of 60% of thepopulation and manufacturing capacity of the U.S., aswell as 60 percent of Canada’s population.[11] Theregion includes the Interstate 70/75 interchange, whichis one of the busiest in the nation with 154,000 vehiclespassing through in a day. Of those, anywhere between30 percent and 35 percent are trucks hauling goods. Inaddition, the I-75 corridor is home to the busiest north-south rail route east of the Mississippi.[12][edit] Tax efficient supply chain managementTax Efficient Supply Chain Management is abusiness model which consider the effect of Tax indesign and implementation of supply chainmanagement. As the consequence of Globalization,business which is cross-nation should pay different taxrates in different countries. Due to the differences,global players have the opportunity to calculate andoptimize supply chain based on tax efficiency[13]legally. It is used as a method of gaining more profit forcompany which owns global supply chain.[edit] Supply chain sustainabilitySupply chain sustainability is a business issue affectingan organization’s supply chain or logistics network andis frequently quantified by comparison with SECHratings. SECH ratings are defined as social, ethical,cultural and health footprints. Consumers have becomemore aware of the environmental impact of their
  27. 27. purchases and companies’ SECH ratings and, alongwith non-governmental organizations ([NGO]s), aresetting the agenda for transitions to organically-grownfoods, anti-sweatshop labor codes and locally-producedgoods that support independent and small businesses.Because supply chains frequently account for over 75%of a company’s carbon footprint[14] many organizationsare exploring how they can reduce this and thusimprove their SECH rating.For example, in July, 2009 the U.S. based Wal-Martcorporation announced its intentions to create a globalsustainability index that would rate products accordingto the environmental and social impact made while theproducts were manufactured and distributed. Thesustainability rating index is intended to createenvironmental accountability in Wal-Marts supplychain, and provide the motivation and infrastructure forother retail industry companies to do the same.[15][edit] Components of supply chain managementintegrationThe management components of SCMThe SCM components are the third element of the four-square circulation framework. The level of integrationand management of a business process link is a functionof the number and level, ranging from low to high, ofcomponents added to the link (Ellram and Cooper,1990; Houlihan, 1985). Consequently, adding more
  28. 28. management components or increasing the level of eachcomponent can increase the level of integration of thebusiness process link. The literature on business processre-engineering,[16] buyer-supplier relationships,[17] andSCM[18] suggests various possible components thatmust receive managerial attention when managingsupply relationships. Lambert and Cooper (2000)identified the following components: Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure Risk and reward structure Culture and attitudeHowever, a more careful examination of the existingliterature[19] leads to a more comprehensiveunderstanding of what should be the key critical supplychain components, the "branches" of the previousidentified supply chain business processes, that is, whatkind of relationship the components may have that arerelated to suppliers and customers. Bowersox and Clossstates that the emphasis on cooperation represents thesynergism leading to the highest level of jointachievement (Bowersox and Closs, 1996). A primarylevel channel participant is a business that is willing toparticipate in the inventory ownership responsibility or
  29. 29. assume other aspects of financial risk, thus includingprimary level components (Bowersox and Closs, 1996).A secondary level participant (specialized) is a businessthat participates in channel relationships by performingessential services for primary participants, includingsecondary level components, which support primaryparticipants. Third level channel participants andcomponents that support the primary level channelparticipants and are the fundamental branches of thesecondary level components may also be included.Consequently, Lambert and Coopers framework ofsupply chain components does not lead to anyconclusion about what are the primary or secondary(specialized) level supply chain components (seeBowersox and Closs, 1996, p. 93). That is, what supplychain components should be viewed as primary orsecondary, how should these components be structuredin order to have a more comprehensive supply chainstructure, and how to examine the supply chain as anintegrative one (See above sections 2.1 and 3.1).Reverse supply chain Reverse logistics is the processof managing the return of goods. Reverse logistics isalso referred to as "Aftermarket Customer Services". Inother words, any time money is taken from a companyswarranty reserve or service logistics budget one canspeak of a reverse logistics operation.[edit] Supply chain systems and value
  30. 30. Supply chain systems configure value for those thatorganise the networks. Value is the additional revenueover and above the costs of building the network. Co-creating value and sharing the benefits appropriately toencourage effective participation is a key challenge forany supply system. Tony Hines defines value asfollows: “Ultimately it is the customer who pays theprice for service delivered that confirms value and notthe producer who simply adds cost until that point” [20][edit] Global supply chain managementGlobal supply chains pose challenges regarding bothquantity and value:Supply and value chain trends Globalization Increased cross border sourcing Collaboration for parts of value chain with low-cost providers Shared service centers for logistical and administrative functions Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums Complex problems involve also midsized companies to an increasing degree,These trends have many benefits for manufacturersbecause they make possible larger lot sizes, lower taxes,and better environments (culture, infrastructure, special
  31. 31. tax zones, sophisticated OEM) for their products.Meanwhile, on top of the problems recognized insupply chain management, there will be many morechallenges when the scope of supply chains is global.This is because with a supply chain of a larger scope,the lead time is much longer. Furthermore, there aremore issues involved such as multi-currencies, differentpolicies and different laws. The consequent problemsinclude:1. different currencies and valuations indifferent countries; 2. different tax laws (Tax EfficientSupply Chain Management); 3. different tradingprotocols; 4. lack of transparency of cost and profit.[ [edit