Supply Chain Management - an Introduction

The principle of 'Survival of the fittest' remains valid in the present global economy characterized by the presence of ever changing business environment. Every modern company needs to struggle for the existence & growth under such a competitive environment. One surest way to achieve this is to offer best quality of product at reasonable rate, which suits well to the requirements of target customer. To impart a feeling of delight in the minds of consumers and provide quality product at reasonable price manufacturer has to bring shift in his emphasis from mere cost ascertainment to cost reduction to reduce cost of production. Thus, cost reduction is the main managerial mantra as once quoted by well-known strategist Michael.E.Porter in his landmark book "Competitive Strategy". There are number of strategic cost management techniques available like Supply Chain Management (SCM) , Business Process Re-engineering (Value Re-engineering), Total Productive Maintenance to reduce cost. Of these Supply Chain Management is prominent tool to reduce cost. In this backdrop the present paper aims to highlight the conceptual framework of SCM, Modus Operandi and its relevance for corporate world in the new millennium.

Supply Chain Management has become a very powerful technique as it increases the responsiveness to the changing business conditions and enhances the competitiveness of the organization. In today's intense competition, and increasingly global economy, to survive and grow, organization must enhance their market responsiveness and become cost competitive. The supply Chain framework is a method of breaking down the linked set of value creating activities from basic raw material/component supplier to the supply of the end product to customer/consumer.

A supply chain is a business process that links manufacturers, retailers, customers and suppliers in the form of a chain to, develop and deliver products as a single virtual organization of pooled skills and resources. Supply chain management is process of synchronizing the flow of physical goods and associated information from the production line of low level component suppliers to the end consumer, resulting in the provision of early notice of demand fluctuations and synchronization of business processes among all the co-operating organizations in this supply chain.

Definition:

Definitions from well-respected references have varied during the past decade. For example, Supply Chain Yearbook 2000 described SCM as, "A chain of processes that facilitates business activities between trading partners, from the purchase of raw goods and materials for manufacturing to delivery of a finished product to an end user." APICS-The Performance Advantage, offered this definition in January 1999: "The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash."

This is a little change from the 1997 definition, Logistics Management offered, describing SCM as, "The delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption." The definition evolution continues as European Logistics Association, in 1995 suggested SCM was, "The organization, planning, control and execution of the goods flow from development and purchasing through production and distribution to the final customer in order to satisfy the requirements of the market at minimum cost and minimum capital use.

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One of the first to pinpoint an accurate description of SCM, International Journal of Logistics Management, in 1990, called it, "An integrative philosophy to manage the total flow of a distribution channel from the supplier to the ultimate user."

Several themes appear consistent among most definitions of SCM:

o The scope extends from sources of supply to final customers

o In addition to products and services, information and financial flows are included

o The objective is to satisfy customer demand at the lowest possible cost

o A global and integrative approach is needed to manage the process

Cost Reduction & SCM

There are number of cost reduction techniques available for management to reduce cost which ranges from Man Power Reduction , Strict supervision , compromise with quality , Overtime work etc . But cost reduction at the cost of quality is mere waste strategy. SCM aims at cost reduction without affecting quality. SCM strategy is to reduce cost by eliminating all non value added activities in the flow of goods from Raw material supplier to End consumer. The Objective of SCM is to increase the competitive advantage of the channel as a whole. The means to accomplish this objective is through creating customer value superior to the competitot's value offering and ,thus, to enhance customer satisfaction , either through improving efficiency (lower cost) or effectiveness (added values at the same cost).
The principle of 'Survival of the fittest' remains valid in the present global economy characterized by the presence of ever changing business environment. Every modern company needs to struggle for the existence & growth under such a competitive environment. One surest way to achieve this is to offer best quality of product at reasonable rate, which suits well to the requirements of target customer. To impart a feeling of delight in the minds of consumers and provide quality product at reasonable price manufacturer has to bring shift in his emphasis from mere cost ascertainment to cost reduction to reduce cost of production. Thus, cost reduction is the main managerial mantra as once quoted by well-known strategist Michael.E.Porter in his landmark book "Competitive Strategy". There are number of strategic cost management techniques available like Supply Chain Management (SCM) , Business Process Re-engineering (Value Re-engineering), Total Productive Maintenance to reduce cost. Of these Supply Chain Management is prominent tool to reduce cost. In this backdrop the present paper aims to highlight the conceptual framework of SCM, Modus Operandi and its relevance for corporate world in the new millennium.

Supply Chain Management has become a very powerful technique as it increases the responsiveness to the changing business conditions and enhances the competitiveness of the organization. In today's intense competition, and increasingly global economy, to survive and grow, organization must enhance their market responsiveness and become cost competitive. The supply Chain framework is a method of breaking down the linked set of value creating activities from basic raw material/component supplier to the supply of the end product to customer/consumer.

A supply chain is a business process that links manufacturers, retailers, customers and suppliers in the form of a chain to, develop and deliver products as a single virtual organization of pooled skills and resources. Supply chain management is process of synchronizing the flow of physical goods and associated information from the production line of low level component suppliers to the end consumer, resulting in the provision of early notice of demand fluctuations and synchronization of business processes among all the co-operating organizations in this supply chain.

Definition:

Definitions from well-respected references have varied during the past decade. For example, Supply Chain Yearbook 2000 described SCM as, "A chain of processes that facilitates business activities between trading partners, from the purchase of raw goods and materials for manufacturing to delivery of a finished product to an end user." APICS-The Performance Advantage, offered this definition in January 1999: "The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash."

This is a little change from the 1997 definition, Logistics Management offered, describing SCM as, "The delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption." The definition evolution continues as European Logistics Association, in 1995 suggested SCM was, "The organization, planning, control and execution of the goods flow from development and purchasing through production and distribution to the final customer in order to satisfy the requirements of the market at minimum cost and minimum capital use."

One of the first to pinpoint an accurate description of SCM, International Journal of Logistics Management, in 1990, called it, "An integrative philosophy to manage the total flow of a distribution channel from the supplier to the ultimate user."

Several themes appear consistent among most definitions of SCM:

o The scope extends from sources of supply to final customers

o In addition to products and services, information and financial flows are included

o The objective is to satisfy customer demand at the lowest possible cost

o A global and integrative approach is needed to manage the process

Cost Reduction & SCM

There are number of cost reduction techniques available for management to reduce cost which ranges from Man Power Reduction , Strict supervision , compromise with quality , Overtime work etc . But cost reduction at the cost of quality is mere waste strategy. SCM aims at cost reduction without affecting quality. SCM strategy is to reduce cost by eliminating all non value added activities in the flow of goods from Raw material supplier to End consumer. The Objective of SCM is to increase the competitive advantage of the channel as a whole. The means to accomplish this objective is through creating customer value superior to the competitot's value offering and ,thus, to enhance customer satisfaction , either through improving efficiency (lower cost) or effectiveness (added values at the same cost).