Supply chain

From Wikipedia, the free encyclopedia

An illustration of a company's supply chain; the arrows stand for supplier-relationship management, internal SCM and
customer-relationship management[1] (cf. Chen/Paulraj, 2004)

A supply chain is a system of organizations, people, technology, activities, information and resources
involved in moving a product or service from supplier to customer. Supply chain activities transform natural
resources, raw materials and components into a finished product that is delivered to the end customer. In
sophisticated supply chain systems, used products may re-enter the supply chain at any point where
residual value is recyclable. Supply chains link value chains.[2]

Contents
 [hide]

1 Overview

2 Supply chain modeling

3 Supply chain management

4 Standardization

o 4.1 Nomeclature, classification and

codification

5 See also

6 References

7 External links

[edit]Overview

The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as
follows: “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 an integrating function
with primary responsibility for linking major business functions and business processes within and across
companies into a cohesive and high-performing business model. It includes all of the logistics management
activities noted above, as well as manufacturing operations, and it drives coordination of processes and
activities with and across marketing, sales, product design, finance and information technology.”

A typical supply chain begins with ecological and biological regulation of natural resources, followed by the
human extraction of raw material, and includes several production links (e.g., component construction,
assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and
ever more remote geographical locations, and finally reaching the consumer.

Many of the exchanges encountered in the supply chain will therefore be between different companies that
will seek to maximize their revenue within their sphere of interest, but may have little or no knowledge or
interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organizing
network of businesses that cooperates to provide product and service offerings has been called
the Extended Enterprise.[citation needed]

[edit]Supply chain modeling

A diagram of a supply chain. The black arrow represents the flow of materials and information and the gray arrow
represents the flow of information and backhauls. The elements are (a) the initial supplier, (b) a supplier, (c) a
manufacturer, (d) a customer, (e) the final customer.

There are a variety of supply chain models, which address both the upstream and downstream sides.
However the SCOR model is most common.

The SCOR Supply-Chain Operations Reference model, developed by the Supply Chain Council, measures
total supply chain performance. It is a process reference model for supply-chain management, spanning
from the supplier's supplier to the customer's customer.[3] It includes delivery and order fulfillment
performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and
other factors in evaluating the overall effective performance of a supply chain.

The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework [4] is built
on eight key business processes that are both cross-functional and cross-firm in nature. Each process is
managed by a cross-functional team, including representatives from logistics, production, purchasing,
finance, marketing and research and development. While each process will interface with key customers
and suppliers, the customer relationship management and supplier relationship management processes
form the critical linkages in the supply chain.

The American Productivity & Quality Center (APQC) Process Classification Framework (PCF) SM is a high-
level, industry-neutral enterprise process model that allows organizations to see their business processes
from a cross-industry viewpoint. The PCF was developed by APQC and its member companies as an open
standard to facilitate improvement through process management and benchmarking, regardless of industry,
size, or geography. The PCF organizes operating and management processes into 12 enterprise level
categories, including process groups and over 1,000 processes and associated activities.

[edit]Supply chain management

A German paper factory receives its daily supply of 75 tons of recyclable paperas its raw material

In the 1980s, the term Supply Chain Management (SCM) was developed[5] to express the need to integrate
the key business processes, from end user through original suppliers. Original suppliers being those that
provide products, services and information that add value for customers and other stakeholders. The basic
idea behind the SCM is that companies and corporations involve themselves in a supply chain by
exchanging information regarding market fluctuations and production capabilities.

If all relevant information is accessible to any relevant company, every company in the supply chain has the
possibility to and can seek to help optimizing the entire supply chain rather than sub optimize based on a
local interest. This will lead to better planned overall production and distribution which can cut costs and
give a more attractive final product leading to better sales and better overall results for the companies
involved.

Incorporating SCM successfully leads to a new kind of competition on the global market where competition
is no longer of the company versus company form but rather takes on a supply chain versus supply chain
form.

Many electronics manufacturers ofGuangdong rely on supply of parts from numerous component shops in Guangzhou

The primary objective of supply chain management is to fulfill customer demands through the most efficient
use of resources, including distribution capacity, inventory and labor. In theory, a supply chain seeks to
match demand with supply and do so with the minimal inventory. Various aspects of optimizing the supply
chain include liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance
between lowest material cost and transportation, implementing JIT (Just In Time) techniques to optimize
manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer
markets, and using location/allocation, vehicle routing analysis, dynamic programming and, of course,
traditional logistics optimization to maximize the efficiency of the distribution side.

There is often confusion over the terms supply chain and logistics. It is now generally accepted that the
term Logistics applies to activities within one company/organization involving distribution of product
whereas the term supply chain also encompasses manufacturing and procurement and therefore has a
much broader focus as it involves multiple enterprises, including suppliers, manufacturers and retailers,
working together to meet a customer need for a product or service. [citation needed]

Starting in the 1990s several companies chose to outsource the logistics aspect of supply chain
management by partnering with a 3PL, Third-party logistics provider. Companies also outsource production
to contract manufacturers.[6]

There are actually four common Supply Chain Models. Besides the two mentioned above, there are the
American Productivity & Quality Center's (APQC) Process Classification Framework and the Supply Chain
Best Practices Framework.

An unusual food supply chain operated by illiterate Dabbawalas in Mumbai is noted for being extremely
reliable without using any computers or modern technology. It has been verified to be a six sigma supply
chain.[7]