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Saturday, April 30, 2016

What is Supply Chain Management

Supply Chain Management

Supply Chain Management has become popular in the past few years. There are several reasons for this but the main reason is that every company wants to save time, keep the environmental issues in mind as well as deliver quality products to their customers. The customer wants regular and faster flow of products, the company wants to fulfill the demand of the customer as well as gain profit. Supply chain management helps in achieving that task.

What is Supply Chain Management?

The term Supply Chain Management is defined in several ways. Some authors call it a management philosophy, some call it an operational technique while some call it management process. Even the terms involved in Supply Chain Management are rather complicated which makes it difficult to understand and utilize it. Therefore there is a need to define supply chain management in a proper way.

It is also noted that in the past more authors have defined Supply Chain, instead of defining the term supply chain management and in this case the term Supply Chain is defined as a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a customer.

Upstream flow deals with the organization and the supplier and the collection of raw material while downstream flow deals with the processing of the raw material by the organization, finish the product and then make sure it reaches the customer.

Supply Chain can be divided into three degrees of complexities.

  • Direct Supply Chain.
  • Extended Supply Chain.
  • Ultimate Supply Chain.

A direct supply chain consists of an organization which deals with both the supplier and the customer involved in the upstream and/or downstream flows of products, services and finances and information.


An extended supply chain includes suppliers of the immediate supplier and customers of the immediate customer, all involved in the upstream and/or downstream flows of products, services, finances and information.

An ultimate supply chain includes all the organizations involved in all the upstream and downstream flows of products, services, finances and information from the ultimate supplier to the ultimate customer.

It is also to be noted that Supply Chain exists within a business no matter what while management of supply chain is a totally different phenomenon and requires expertise. Also, one organization can be a part of several supply chains at the same time.

Supply Chain Management can be classified into three categories. A management philosophy, implementing of a management philosophy and the management processes. An alternative definition of Supply Chain Management can be “Supply chain management deals with the total flow of materials from suppliers through end users...” (Jones and Riley, 1985) this paper looks at defining a proper definition that is acceptable and easy to understand for everyone.

Supply Chain Management as Management Philosophy.

A system approach that takes all the processes involved as a whole and managing the total flow of goods from the supplier to the customer.

Each firm in the supply chain are directly or indirectly related to the performance of the other so all the efforts are to unify the intra firm and inter firm operational strategies to achieve one goal.

Create such values that the customer is satisfied and feels valued.

Supply Chain Management for Implementing Management Philosophy.

To implement a management philosophy Supply Chain Management helps in creating specific activities that lead to implementation.


  • The companies should expand integrated behavior to incorporate the customers and suppliers.
  • For planning and monitoring processes the companies should implement mutual sharing of information.
  • Mutually sharing risk and rewards also helps in achieving long term goals and competitive advantage.
  • Cooperation is required among different organizations to implement Supply Chain Management.
  • All the members of Supply Chain should have the same goal and focus of serving the customers. 
  • Supply Chain Management needs integration of processes from sourcing, to manufacturing and distributing. 
  • Partners should build and maintain long term relations.


Supply Chain Management as set of Management Processes.

A set of activities that are designed to produce specific amount of product for a particular customer or to fulfill the demand of a market.

Supply Chain Management is looking at different processes, managing them and finishing to provide the product to the customers while Supply Chain Orientation is a broader field which views the tactical activities in the supply chain from overall system perceptive. It is defined as the recognition by an organization of the systemic, strategic implications of the tactical activities involved in managing the various flows in a supply chain. In other words, a Supply Chain Orientation is a management philosophy, and Supply Chain Management is the sum total of all the management actions undertaken to realize that philosophy.

Antecedents to Supply Chain Orientation and Supply Chain Management.

The factors that enhance the implementation of Supply Chain Orientation philosophy are known as antecedents. Trust and commitment are the two main factors in this regard and are interrelated. If there is more trust there will be more commitment. Both these factors help to build strong relationship between investors and partners. Help to focus on long term objectives instead of short term ones. Also helps in taking high risk actions with care and a lot of planning. Different companies have to depend on each other to achieve specific goals this interdependence leads to organizational compatibility between these companies. There should also be an agreement on key roles and the vision among different companies and one of them should act as a leader, which is an important factor in implementing SCO, also top management support helps in shaping the organization values.

Consequences of Supply Chain Management.

The implementation of SCM is due to several reasons. In case of the company it can include gaining more profit and capturing the market, at the same time it helps in increasing customer satisfaction this interrelation leads to improve profitability of supply chain and its members. After going through different factors it can be concluded that the consequences of SCM are lower cost and improved customer value and satisfaction to achieve competitive advantage.

Scope of Supply Chain Management.

There are two types of scope for SCM which are functional and organizational. The functional scope usually deals with which traditional business functions are included or excluded in the implementation and the process of SCM while the organizational scope of SCM deals with what kinds of inter-firm relationships are relevant to the participating firms in the implementation and the process of SCM.

Definition of Supply Chain Management.

After going through all the factors and understanding the theory finally a definition for Supply Chain Management can be deduced which in this case 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.

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