Introduction to Supply Chain Management

A supply chain is a sequence of organizations - their facilities, functions and activities - that are involved in producing and delivering a product or service. Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible. A value chain is another name for a supply chain.

It is important to understand that supply chain management is much more than logistics, transportation, or inventory management. Supply chain management is important as all the value adding activities are not just done in the boundary of the company. It is deal with managing the value chain, effectively and efficiently to match the supply with the demand. Supply chain is about following aspects to create one of the source of competitive advantages for the company:

• Develop strategic objectives and tactics
• Integrate and coordinate activities in the internal portion of the supply chain e.g. Make or buy decision, Sell-use or Sell-product (Sell use, when Idle cost > Logistic/information management cost)
• Coordinate activities with suppliers and customers
• Coordinate planning and execution across the supply chain 
• Consider forming strategic partnerships (type of contracts/relationship)

Why Supply Chain Management is so important?

• To gain efficiencies from procurement, distribution and logistics
• To make outsourcing more efficient
• To reduce transportation costs of inventories
• To meet competitive pressures from shorter development times, more new products, and demand for more customization
• To meet the challenge of globalization and longer supply chains
• To meet the new challenges from e-commerce
• To manage the complexities of supply chains
• To manage the inventories needed across the supply chain

Why Supply Chain Management is difficult?

Different organizations in the supply chain may have different, conflicting objectives.

Manufacturers: long run production, high quality, high productivity, low production cost

Distributors: low inventory, reduced transportation costs, quick replenishment capability

Customers: shorter order lead time, high in-stock inventory, large variety of products, low prices

Supply chains are dynamic - they evolve and change over time

Characteristics of Supply Chain

• Secrecy via strong contractual clauses... about product / technology until the product is launched... strong legal binding with supplier is critical... E.g. Apple
• Ethical ... E.g. child labor.. lead paint issue...
• High quality standards...
• Value-aiding supplier... Supplier should grow along with you...
• Cost.. Delivery Time ... flexibility..