Supply Chain Management

Consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982, developed the term “Supply Chain Management”.

A Supply Chain spans all movement and storage of raw materials, work-in-process inventory and finished goods from point-of-origin to point-of-consumption. A Supply Chain exists for each item within and associated with a product, therefore a product can have multiple supply chains. To enable the availability of a product, a network of logistics service providers (LSP) can provide multiple services to each supply chain. In total, this is the Supply Chain Network for an organisation.

Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of supply chains with the purpose to satisfy customer requirements, (that is Availability) as efficiently and effectively as possible. As supply chains involve the participation of multiple independent organisations, the management of supply chains is mainly concerned with the management of internal and external relationships.

The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management activities. Importantly, it also includes co-ordination and collaboration with channel parties, which can be suppliers, intermediaries, logistics service providers and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.

Supply Chain Event Management (SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM, possible scenarios can be created and solutions can be planned.
Some commentators distinguish supply chain management and logistics, while others consider the terms interchangeable. Supply Chain should be considered as a concept, while Logistics is the discipline and profession. Supply Chain Management must address the following challenges:

a Distribution Network Configuration: The number and location of suppliers; the number and location of production facilities distribution centres and warehouses (owned and contracted), plus the number and location of customer receiving locations

b Distribution Strategy: Centralised versus decentralized, direct shipment, Cross docking, pull or push strategies, use of logistics service providers (LSP)

c Information: Integrate systems and processes through the supply chain to share data and information, including demand signals, forecasts, inventory and transport

d Inventory Management: Quantity and location of inventory including raw component and packaging materials, work-in-process and finished goods
The Supply Chain integration enablers, also referred to as the elements of Supply Chain Management, include the following:

e Daily production and distribution planning, including all nodes in the supply chain

f Production scheduling for each manufacturing facility in the supply chains

g Demand planning and forecasting, co-ordinating the demand forecast of all customers and sharing the forecast with all suppliers.

h Sourcing planning, including current inventory and forecast demand, in collaboration with suppliers

i Inbound operations, including transport from suppliers and receiving inventory

j Production operations, including the consumption of materials and flow of finished goods.

k Outbound operations, including all fulfilment activities and transport to customers

l Return of goods (reverse logistics)

m Order promising, accounting for all constraints in the supply chain, including suppliers, manufacturing facilities, distribution centres and other customers

n Performance tracking of all activities

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Last updated Tuesday May 22nd, 2007 by Pieter Nagel