What is Supply Chain?
Given the almost daily exposure and coverage of modern business theories or concepts in the popular press, one of the great challenges for both small business owners and corporate executives is the need to separate the wheat from the chaff. In the last four or five decades, businesspeople have heard and read about the next great idea that will revolutionize business as we know it. One almost feels obligated to run out and buy a book that lays out the general principles of concepts such as management by objectives, business process reengineering, transactional versus transformational leadership, management by walking around, the learning organization, matrix management, benchmarking4, lean methodologies, and several quality systems—total quality management, the Deming method, and Six Sigma. Some of these have proven to be business fads and have run their course—sometimes with poisonous effects. Others, such as lean methodologies and some quality systems, have proven to be solid bases on which to improve an organization’s efficiency and effectiveness.
A modern concept that has been popularized over the last two decades is that of supply chain management. In one sense, supply chain management is as old as business itself. One has to look only at the traffic along antiquity’s Silk Road trade route. This route was used to move goods across Asia’s vast steppes between China and the Middle East and as far west as ancient Rome. It possessed most of the fundamental elements of today’s supply chain: goods were produced (make), transported (move), deposited in warehouses (store), purchased by merchants (buy), and sold to customers.
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 the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. Supply chain management is not limited to the flow of goods and materials. The successful supply chain requires a consideration of both financial flows and information flows across the entire chain. A second theme is that organizations must overcome myopia of just being concerned with their immediate suppliers and customers. They must take into consideration their suppliers’ suppliers and their customers’ customers. To be able to do this, organizations must expand the flow of communication and information.
