Supply-Chain Management

A supply chain is a network that comprises every process and every party involved in the creation of goods, from before they are manufactured through to their final delivery to and purchase by the customer. Supply chains include the acquisition of materials, manufacturing, moving, and handling of goods from their source (the original supplier) to the end user or customer.

Every step in this chain involves some sort of intervention, which means that every step involves the potential to incur additional costs that the user eventually pays for at the end of the chain. Because the ability to pass goods along the supply chain most effectively will reduce the final price to the end customer—and/or increase profit for the supplier—the ability to manage the transportation actions with efficiency puts money in someone's pocket. Thus, effective supply-chain management is the ability to ensure that every step in the process is carried out as efficiently as possible, including all aspects of the transportation that occurs in the process.

The formal concepts of supply chains and supply chain management are of relatively recent origin, although in practice they have existed, albeit in a primitive form, since the 1960s. The name and formal definitions date from the 1980s but they were not widely used until the 1990s. Supply-chain management is not only now widely accepted, but it also forms the basis of an academic discipline (and degree programs with that concentration) and a lively community of organizations that seeks to define best practices and standards.

Although there has not been a great deal of activity in the study of supply chains as a serious academic discipline, that situation is gradually changing, as there has been an increase in articles addressing supply chains and their management, and scholarly books are beginning to appear, as well.

[Page 1288]What made the introduction of supply chains and their management significant was the view of looking at an entire cycle of development and delivery that focused on an overall process with many players rather from a single industry or participant perspective. As an overall concept, supply-chain management includes the management, oversight, communication, and planning required at every step of this complex process.

A major factor in the complexity of managing the supply chain is the potentially large number of processes: finding and getting resources, transporting them to a manufacturer or other value-add organization, the manufacture or crafting process, transportation to distributors—sometimes on an international basis—and eventual delivery to the customer. It can involve many suppliers, both of raw materials and manufactured components that make up the finished product, government agencies both domestic and international, and commercial distributors. One factor to be closely monitored by managers is that there is potential for a large number of participants, each of whom seeks to maximize its profits at its touch point, to add small extra costs along the way that will eventually add up to a large increase in the total cost to the customer.

As supply chains have become more widely used, specific applications have been developed to support the process, and third-party organizations have appeared to perform specific parts of the chain, providing managers with the ability to access support without having it as an integral part of their organizations.

...