Supply chains are vital process in managing activities of organization. It incorporates the companies and the business activities that are required to design, make, deliver, and use a product or service. In international business climate, supply chain strategies are implemented by most of the companies. The main motivation to implement supply chain policies is aggressive competitive pressure, and organization visualize that through effective supply chains, they can flourish in marketplace. Oliver and Webber stated that the supply chain is visualized as a distinct unit and no other arenas of responsibility like purchasing, engineering, and distribution (1982). Businesses rely on their supply chains in order to provide them with what they need to survive and flourish. Every business fits into one or more supply chains and has an important role to play in each of them. The practice of supply chain management is guided by fundamental management concepts that are developed from earlier time.
The term "supply chain management" arose in the late 1980s and came into extensive use in the decade of 1990. Supply Chain Management (SCM) and Execution (SCE) are the interactive and collective processes and tools that influence strategic relationships within the supply chain for the sharing of confidential and mission critical sales, forecasting, planning, purchasing and replenishment data with the crucial objective of maximizing efficiencies, reducing costs and increasing profits by proactively insuring that the right product is delivered to the right place at the right time.
Theoretical perspective: The phrase supply chain management was originally introduced by consultants in the decade of 1980's and consequently has become extensively used. Since the early 1990's, researchers have attempted to describe supply chain management. Bechtel and Jayaram provided an extensive retrospective review of the literature and research on supply chain management. They identified general schools of thought, and the major contributions and fundamental assumptions of supply chain management that must be challenged in the future. In recent time, numerous practitioners, consultants and academics visualized supply chain management as not appreciably different from the modern understanding of logistics management, as explained by the Council of Logistics Management. Supply chain management was viewed as logistics outside the firm to include customers and suppliers. The understanding of supply chain management has been re-conceptualized from integrating logistics across the supply chain to integrating and managing main business processes across the supply chain.
Current description of supply chain management is as follows:
"Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the point-of-consumption in order to meet customers' requirements".13
Lambert, Stock, and Ellram described that a supply chain is the alignment of firms that bring products or services to market." According to Chopra and Meindl, A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. Other theorists, Ganeshan and Harrison stated that a supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers."Supply chain network structure (Source: Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, 1998)
The basic supply chain should be incorporated to manage a multifaceted flow of information, both between and within enterprises. The major challenge is to assimilate this information and make it accessible where, when and how needed. For most profitable supply chains, value will be strongly correlated with supply chain success, the difference between the revenue generated from the customer and the overall cost across the supply chain (Chopra, Sunil and Peter Meind, 2004).
Effective supply chain management needs concurrent improvements in both customer service levels and the internal operating efficiencies of the organizations in the supply chain. Customer service at its most elementary level means consistently high order fill rates, high on-time delivery rates, and a very low rate of products returned by customers for whatever reason. Internal efficiency for organizations in a supply chain means that these organizations get an attractive rate of return on their investments in inventory and other assets and that they find ways to lower their operating and sales expenses. There is a fundamental pattern to the practice of supply chain management. Each supply chain has its own exclusive set of market demands and operating challenges.
The ultimate goal of supply chain is to decrease the inventory with the assumption that products are available whenever required. As a solution of successful supply chain management, sophisticated software system with web interfaces are competing with web application service providers who promise to offer part or all of for companies who rent their services.Figure:
Supply chain management must be observed as a critical element of business strategy, delivering improved productivity through increased efficiencies and dealer management strategy requires the devoted efforts of a talented team. There is a great challenge with managers who manage within the supply chain, in having the ability to maintain focus on strategy despite the barrage of transactional issues they are engrossed in.
The conceptual framework highlights the inter-related nature of SCM and the need to proceed through several steps to design and successfully manage a supply chain. The supply chain management framework consists of three closely inter-related elements: the supply chain network structure, the supply chain business processes, and the supply chain management components.Figure: Supply Chain Management Framework: Elements and Key Decisions (Source: Douglas M. Lambert, Martha C. Cooper and Janus D. Pagh, 1998)
There are six elements of supply chain strategy, which, if utilized collectively and managed carefully, will deliver significant value across the organization.
Companies in any supply chain must make decisions independently and jointly regarding their actions in five areas:
Effective and reliable supply chain solution engage in five major steps.
Benefits of supply chain management: There are several benefits of supply chain management. Effective supply chain management achieves more precise information, along with the ability to carry out better sales forecasting. Other benefits include developing strong partnerships and supplier networks, balancing out supply and demand, improving business plans and working strategies, predicting transportation requirements, planning daily operations of the company, creating streamlined inventory management and removing irrelevant elements.
While all organizations have supply chain processes of varying degrees, it is important to understand, identify and implement each stage with careful consideration. Variables, including the size of the organization and the type of product manufactured affect supply chain management components.
To summarize, a supply chain comprises of all the companies involved in the design, production, and delivery of a product to market. Supply chain management is the synchronisation of production, inventory, location, and transportation among the participants in a supply chain to accomplish the best mix of receptiveness and effectiveness for the market being served. The objective of supply chain management is to escalate sales of goods and services while reducing both inventory and operating expenses.