Supply Chain Management

Supply chain management oversees the businesses providing a product or service, through all stages from raw materials to purchase of a final product. The supply chain begins with natural resources and the cultivation, development, or discovery thereof. It proceeds from there to encompass the harvest, removal, or extraction of those resources, their processing into usable forms, the construction of components of the product, the assembly of those components, the use of storage and transportation resources, and the sales venue.

The supply chain of Coca-Cola, for instance, involves something like this: the agricultural concerns producing corn, vanilla, spices, and citrus; the processing and sale of clean water; the processing of the agricultural goods into corn syrup and flavor extractives; the production by the Coca-Cola Company of Coca-Cola syrup from those ingredients and water; the sale of that syrup to soda fountains and the Coca-Cola Bottling Company; the dilution and carbonation of that syrup by same, and subsequent packaging and distribution by the Coca-Cola Bottling Company; and the final sale to a customer of a fountain drink or canned or bottled Coca-Cola; as well as all transport of goods from one company or facility to another. Most consumer goods can be expected to involve at least four companies or subsidiaries: the provider of the raw material, the manufacturer of components, the manufacturer of the product, and the vendor of the product.

The group of businesses allied together in the production of a good or service is often called the Extended Enterprise, a term that emphasizes their mutual interests. These businesses can be subsidiaries of some larger company, or part of formal partnerships or alliances, or may only be linked by contracts. In the Coca-Cola example, the company has a long-standing association with the Coca-Cola Bottling Company, for instance, and long-term vending contracts with various chains of convenience stores, restaurants, sporting venues, and so forth. But many of the items it uses in the production of its product are purchased on the open market, its association with those providers thus maintained transaction to transaction, and likewise the majority of the locations where Coca-Cola products are purchased have no formal relationship with the company, having acquired the product from a distributor and nearly always stocking the company's competitors' products as well. The Extended Enterprise includes advertisers, marketing agencies, public relations firms, franchise attorneys, real estate lessors, consultants, IT firms, and other companies who are involved in the life of the product—the extended family thereof, so to speak—but not in the supply chain as such. As business processes like customer service, tech support, and accounting procedures become standardized in the international community, the Extended Enterprise increasingly includes outsourcing firms.

For that matter, businesses in general are less likely to perform every task themselves anymore, making most supply chains multicompany. The farmer driving his goods to market represents a smaller and smaller portion of the pie, and considering how many farmers' markets are patronized by restaurants' kitchen staffs, even that farmer often is not selling to the end consumer. The involvement of multiple businesses in a supply chain makes management of that chain a thing of mutual benefit to all, just as a single company doing multiple operations benefits from streamlining the operations. The term supply chain management dates from the 1980s, when business growth and the sophistication of business philosophy led to the recognition of the benefit of integrating and streamlining the processes involved in bringing a product to market.

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