What is Supply Chain Management? Definition and Introduction | AIMS UK

What is a

supply

chain

? A

supply

chain

is a global network used to deliver products and services from raw materials to end customers through a designed flow of information, physical distribution and cash. Basic supply chain for a product. The following figure illustrates a very basic supply chain with three entities a producer with a supplier and a customer four basic flows that connect the supply chain entities are as follows: flow of physical materials and services from suppliers to the end customer cash flow from the customer to the raw material supplier information flow back and forth along the chain and the reverse flow of returned product a basic supply chain in this figure is made up of these entities seller is a supplier who provides goods and services or a person or organization with whom the buyer does business its generic term in the market is seller supplier provides materials energy services or components for a product or service such as plastic fabric electrical wiring or aircraft a producer is one who receives components from the seller to produce a finished good or service such as cloth shirts plastic tableware electrical energy cables or provides transportation through airplanes the customer is the one who receives the finished product that is, whoever wears those shirts uses the tableware turns on the lights or flies on an airplane strategies There are three types of supply chain strategies stable reactive and efficient reactive The stable supply chain strategy is appropriate for chains that focus on execution efficiency and cost performance.

They use simple connectivity technologies and have little need for real-time information. For example, the table salt manufacturer uses scaled production and dedicated capital assets. The reactive supply chain strategy works well when the chain acts to meet the demand of trading partners, for example, the manufacturer of sports equipment fan apparel, when a team advances to the next round more products are needed; However, for the losing team the demand practically disappears. The efficient reactive supply chain strategy focuses on efficiency and cost.

management

of the total delivery cost of finished products, for example, in supermarket chains, distribution centers, logistics providers and manufacturers cooperate to replace products sold in stores in less than 24 hours. flows in supply chains.

There are four flows in supply chains. The information flow includes sales invoices. literature specifications receipts orders and rules and regulations primary cash flow includes payments for products and supplies primary product flow includes materials components supplies services and finished products reverse product flow includes returns for repair replacements recycling and disposal supply chain example consider a model supply chain of a bakery that sells a variety of cakes and this baker is one end of a supply chain; In this case, a supplier is a wholesale food distributor that provides ingredients such as flour, cream, and sugar; The bakery is the producer who turns those ingredients into a variety of pastries;

The bakery is operated by an owner who is the retailer and sells these cakes to the customer's supply chain in manufacturing. Consider a complex manufacturing supply chain model that appears in corporate supply chains. In this model you will notice the second tier of suppliers and more distribution centers. and customers, these suppliers supply materials and services. You place manufacturing in the center and component suppliers immediately to the left. Tier 1 suppliers have their own suppliers at Tier 2, for example the Tier 1 supplier could be a wholesale food distributor that purchases flour. From your own supplier, this flour supply chain starts from farmers' wheat field, which is supplied to food distributor, processed in a plant, shipped to wholesalers and distributed to stores, no matter

what

As far as you travel to the left, you will never run out of new levels. from suppliers primary product flows from left to right and primary cash flows from right to left supply chain in services initially the supply chain model was developed for manufacturing but the service industry also has supply chains some examples of industries Services include electricity provider legal advisor real estate home construction software and even the federal government in its broadest sense.

Service industries include all organizations except agriculture, mining, and manufacturing. The display below illustrates the supply chain of an electrical utility company that receives products, services, and supplies and provides its services to household customers, commercial customers, and others. Utilities generally pursue one of two types of supply chain

management

: vertical integration and lateral or horizontal integration. Vertical supply chain management is an arrangement in which a company's supply chain is owned by that company, typically each member of the supply chain produces a different product or market-specific service and the products are combined to meet a common need this structure still persists in some companies the vertically integrated company can grow from a corporate base by adding departments and levels of management or through mergers and acquisitions, for example, in an attempt to create a self-sufficient company owned by Ford iron ore mines steel mills a fleet of ships manufacturing plants and showrooms that built and distributed Ford automobiles Horizontal integration is an expansion of a business by acquiring a similar company in the same industry is contrasted with vertical integration where the company produces different items that are related to one product, a company can do so through internal expansion, acquisition or merger, the process can lead to monopoly if one company captures the vast majority of the market for that good or service, for example, a company that manufactures shampoo can add other brands to attract a broader customer base benefits of vertical integration its main benefit is control does not depend on components or services operations can be synchronized with other functions of the company benefits of integration Lateral they achieve economies of scale and scope on which they fully focus on their particular business, so they develop more experience and know their market well.

Differences between vertical and lateral integration. When a company wants to grow through vertical integration, it seeks to strengthen its supply chain, reduce its production costs, capture upstream or downstream profits, or access downstream distribution channels. However, when a company wishes to grow through horizontal integration it seeks to increase its size diversify its product or service achieve economies of scale reduce competition or gain access to new customers in the same market stages of supply chain management evolution advances in the supply chain Management is reflected in the development of each supply chain. There are generally four or five sequential stages globally and within organizations starting from stage 0 to 4, they are stable.

Multiple dysfunctions. Semi-functional company. Integrated company and extended company. Every organization is somewhere within these five stages. Some companies. protect themselves from the changes so they are less advanced some took advantage of the changes and some organizations believe they are at the most advanced stage step 1 multiple dysfunction the core organization lacks

definition

and internal objectives there are no external connections other than a few transactional links that are shown below illustrates the lack of coordinated information flows or strong relationships between potential partners such organizations have unplanned activities more threats fewer forecasts supply and demand problems and poor payment flows stage 2 semi-functional company at this stage the core organization begins to improve effectiveness, efficiency and quality within functional areas, as explained in the following presentation, the flow of information has been improved and the functional areas have been defined, however, the departments perform their functions one after another, there is no collaboration between various departments nor is any association formed with customers and suppliers.

Stage 3 Integrated Enterprise, these organizations are fully integrated across departments using enterprise resource planning or ERP. This is a prelude to end-to-end supply chain management, as explained in the following discussion. The individual company begins to focus on business processes rather than siled functions. The corporate wall unites supply chain partners. Stage 4 extended. company the company integrates its internal network with the internal networks of supply chain partners to improve efficiency, product or service quality, or both. The exhibition shows the progress. This structure allows for complete information sharing across integrated networks and teaming and planning across corporate boundaries. What is it?

Supply chain management is the management of the flow of goods and services includes the movement and storage of raw materials work in process inventory and finished goods from points of origin to points of consumption each product that reaches an end user represents the cumulative effort of multiple organizations some organizations have only paid attention to

what

was happening within their four walls while others have not, but the entire chain of activities ultimately delivered the products to the end customer the result was a disjointed and often ineffective supply chain