A supply chain is defined as a network between a firm and its suppliers by aiming at manufacturing and distributing a product to the end user. Different people, activities, information, and entities and resources are included in this network. The supply chain also consists of the steps of getting the service or product from its provider or manufacturer to the end user.
The Concept Of Supply Chain
The companies develop supply chains to reduce their expenses and remain competitive in the commercial area.
As mentioned above, several steps should be taken to get a service or product from the provider or manufacturer to the consumer. These steps are converting the stock materials into the finished goods, shipping these products, and distributing these services or products among the consumers. The agents who are involved in the supply chain are the manufacturers, sellers, warehouses, shipment firms, distribution centers, and retailers. A supply chain has several elements with the functions from placing an order to meeting the need of the end user. The features of the supply chain are production, marketing, operational activities, distribution, financial operation, and end user’s services.
In other words, the supply chain means a network of organizations, resources, people, technology, and activities applied for manufacturing and selling a product. It ranges from the supply of the raw materials from the supplier to the producer and finally to delivery of the product to the consumer. The distribution channel is a way of getting the end product from the producer to the end user.
As mentioned above, the supply chain involves all producers and suppliers, as well as warehouses, retailers, transporters, and users. The supply chain includes new product development, marketing, operations, distribution, finance, and customer service.
Supply Chain Management Process
The cycle view is the traditional view of the supply chain. In the traditional view of the supply chain, some cycles which are performed between two stages of a supply chain are included in the supply chain means that each period is independent of other cycles optimizing its processes and not being prevented by the issues found in different sequences.
An interesting example is a cycle that delivers products from the producers to the consumers to fill the retailer inventories and which manufactures new finished products to replenish the stock of the producers. The involved processes and holders of the processes, including the roles and responsibilities) are defined by the cycle view of the supply chain.
Although the benefits of a process that approach to the supply chain management and management have been recognized, what process should be taken into account, what activities and sub-processes should be included in each process, and how the processes communicate with each other remain vague.
The business processes which can be involved in the supply chain are as follows:
i. Customer relationship management which determines the service provision agreements with users
ii. Customer service management which gives real information about the transportation date to the customers and product availability via communication with the manufacturing and distribution activities of the organizations
iii. Demand management which creates a balance between the supply abilities of the companies and the customer’s needs
iv. Order fulfillment which provides services and meets the customer’s needs
v. Production flow management which brings the products to the plant as needed by the consumer
vi. Procurement which expands the strategic plans among the suppliers for
the production flow management
vii. Product expansion
In summary, eight key processes that are applied in the Supply Chain Management (SCM) are Customer Relationship Management, Customer Service Management, Demand Management, Order Fulfillment, Manufacturing Flow Management, Procurement, Product Development and Commercialization, and Returns. The marketing time is reduced by integrating the customers and suppliers with the Product Development and Commercialization process. Process of Returns makes alignment in the processes to achieve the return of the items which can be used again.
Eight main business processes can be coordinated with the leading members in the supply chain. There is no need to coordinate all processes. For example, if responsiveness is important in order, the focus should be on order fulfillment, and if innovation is important in the order, the focus should be on the development of the product.
Supply chain management is regarded as an important process due to lower costs of the supply chain results and a faster cycle of production. Supply chain management is defined as the integration of the main business processes in the supply chain. The customer relationship management process structures the development and maintenance of interaction with customers. Management identifies key customers and customer groups to be targeted as part of the firm’s business mission.
To have successful management (SCM), there should be a change in the management of the business processes in a firm into the integration of the operations with main supply chain processes. Besides, one of the important parts of the business process is supply chain management (SCM). A high amount of expertise and skill should be required for creating different links in this chain.
The effective supply chain management will lower the expenses of a firm and increase its profitability. One broken link will affect the other part of the chain and will increase the costs of the firm.
In other words, supply chain management (SCM) means supervision on the information, materials, and financial matters while these factors are in the process of getting from supplier to producer, to seller, to retailer, or to consumer.
The information flow, the product flow, and the financial flow are three important flows of the supply chain. Supply Chain Management (SCM) means that these three flows should be integrated among the firms. The term ‘Supply Chain Management’ is a relatively new term which was first introduced in 1982 in the logistics literature and defined as an innovative management method which focused on the raw materials supply.
Supply Chain Management (SCM) was first explained in 1990 theoretically, and its difference from the old approaches to the materials management as well as the information flow was clarified.
The review of literature about Supply Chain Management (SCM) indicates the necessity of coordination among the chain-like elements from producer to the end users to meet the consumer’s need at lower expenses.
In the Supply Chain Management (SCM), it is recognized that if each firm in a supply chain intends to improve its results not to coordinate its activities and goals with other firms, sub-optimization phenomenon will occur.
The focus in the Supply Chain Management (SCM) is on the management of the relationship since it aims at coordination and supervision on the business activities and processes of the supply chain, leading to delivery of satisfactory products to consumers as well as fulfilling needs of other factors such as government in the supply chain. Since 1990, an essential part of the senior management agenda has been Supply Chain Management (SCM).
The ultimate success of a firm is determined by the successful integration and management of the central business processes among the members of the supply chain. Christopher (1998) states that businesses only compete as supply chains, not as independent entities. Information and Communication Technology (ICT) development, which leads to the exchange of a lot of information to coordinate among the firms, results in a high interest in Supply Chain Management (SCM). More efficient and effective supply chains require coordination of the chain partners. The concept of Supply Chain Management (SCM) attracted a lot of attention from different scientific and business groups such as consultants, academics, and business managers.
The literature on Supply Chain Management (SCM) has been expanded in different fields such as logistics, marketing, transportation, organizational behavior, management information systems, purchasing, operations management, and supply. The Supply Chain Management (SCM) framework had three main elements, i.e., the supply chain structure, business processes of the supply chain, and components of the Supply Chain Management (SCM).
The conceptual framework mainly focuses on the interconnected nature of Supply Chain Management (SCM) and the necessity of taking several steps to design and manage a supply chain successfully. The objectives of the supply chain, i.e., the fulfillment of the consumers’ requirements for the critical performance indicators at any cost and any time are related to each step.
Supply chain performance indicators that are well defined will contribute to the establishment of benchmarks and assessment of changes over time. A single entity can manage supply chains using the top member using a partnerships system that necessities fully developed coordination and cooperation. It is not easy to formulate objectives of the supply chain due to the agreement of all partners on the definition of the target values and indicators and choice of the indicators.
The performance measures currently used in companies are problematic, preventing useful measurement of the total supply chain performance. Supply chain actors should first identify the order qualifiers related to the supply chain due to the improvement of the supply chain performance under their control.
To reduce the marketing costs caused by a mismatch between the products which have reached the market and the intention of the consumer to buy, leading to loss of sales and dissatisfaction of the customers, supply chains related to the innovative products should be designed based on responsiveness and agility. A perfect supply chain doesn’t need to be necessarily agile or lean.
Better delivery of goods, which is accompanied by higher reliability, and responsiveness of the goods delivery, more top quality of the product, more availability of information will lead to a drastic improvement of the supply chain profitability. Application of Supply Chain Management (SCM) leads to a reduction of the transportation costs, a decrease in overstocks, lowering of the direct and indirect labor expenses, and an increase in the gross profit margins and sales rate. For the companies to take benefit of the supply chain, they design and make the supply chain network more efficient. If the cooperative and collaborative plans are associated with the operational change, such benefits will be obtained, and manufacturing and distribution planning require a lot of information. The production of seasonal stock will be postponed with careful planning of demand, leading to shortening and prediction of the order fulfillment cycles.
The distribution and logistics managers can use the product delivery and storage resources better through the guaranteed sales, reducing the costs and increasing the customers’ service, which requires matching of the operations.
Although many efforts have been made to expand the Supply Chain Management (SCM), it has not been realized completely and largely remains only as a promise.
There is no chain transparency as well as coordination among most of the supply chains, and only a part of the supply chain is dealt with in the Supply Chain Management (SCM) projects.
Many concepts related to Supply Chain Management (SCM) including Collaborative Planning, Forecasting, and Replenishment (CPFR), Vendor Managed Inventory (VMI),and factory gate pricing (FGP) should be more transparent, and the revenues and costs should be calculated clearly to distribute them among the supply chain partners.
However, it is not an easy task to define the cost drivers, which allocate direct and indirect costs to the manufacturing activities and their related norms. There should be sufficient deep insight and trust among the processes, but this is difficult to realize.
The reason is that the competitive model, which is widely followed, shows that once the suppliers or customers obtain information, the firms will lose their ability to control profits and bargaining power. The main barriers to realization and implementation of Supply Chain Management (SCM) are lack of transparency, trust, differing objectives, and reward structures supporting the goals of the chain, though the firms perceive the benefits of Supply Chain Management (SCM).
An appropriate and ideal supply chain cannot be developed and exercised on one occasion. There are the driving factors that promote the supply chain, and there is a unique operation condition in each relationship.
For this reason, there are varying breath, closeness, duration, and strength of partnership in varying cases and at different times.