Summary Principles of Supply Chain Management

Summary supply chain
management

,Chapter 1: Introduction to supply chain management
1.1 Introduction

Managing all of the business units of a vertically integrated firm –a firm whose
business boundaries include former suppliers and/or customers- is quite difficult.
Supply chain management plays a crucial role in effectively and efficiently
managing the products and services to and from customers.

1.2 Supply chain management defined

A supply chain consists of the flow of products and services from:
- Raw materials manufacturers
- Component and intermediate manufacturers
- Final product manufacturers
- Wholesalers and distributors
- Retailers

Connected by transportation and storage activities, and integrated through
information, planning, and integration activities




Along the supply chain, intermediate and end customers may need to return
products, obtain warranty repairs or recycle products. These activities are
referred to as reverse logistics activities.

There are many definitions of supply chain management. Consistent across
these definitions is the idea of coordinating or integrating a number of goods-

, and services-related activities to improve operating efficiencies, quality and
consumer service.
Effective supply chain management relies on high levels of trust, cooperation,
collaboration and communications.
Second-tier suppliers and customersThe suppliers of the suppliers of the
focal firm or customers of the customers of the focal firm. Thus the raw
material suppliers and retailers in figure 1.
1.3 The importance of supply chain management

Today many firms still use fourth-party logistics suppliers (4PL)  A company
hired to manage all of a firm’s logistics and supply chain management
capabilities.

When suppliers, manufacturers and customers are willing to work together
through Supply chain management the following benefits can be realized:

- Higher productivity
- Cost savings
- Quality improvements
- and Service enhancements

Bullwhip effectThe magnification of safety stock, based on erratic demand
patterns and forecasts (increasing order fluctuations upstream the supply chain)

1.4 The origins of supply chain management in the U.S.

The following figure shows the historic supply chain events:




Business process reengineering (BPR) The radical rethinking and redesigning of
business processes to reduce waste and increase performance. Later this term
became synonymous for downsizing.

Third party logistics providers (3PL’S)  A 3PL is an outsourced provider that
manages all or a significant part of an organization’s logistics requirements and
performs transportation, locating and sometimes product consolidation activities.