The analogy that a
chain is only as strong as its weakest link holds here
as well. Thus the Supply Chain concept remains the same.
first be able to provide quality products or services in a
timely, cost-effective manner if they want to tackle
broader supply chain issues.
Therefore, programs such as
Total Quality Management, Just-in-Time manufacturing, concurrent
product development, and the like are just as relevant today as they
were in the past. In fact, it’s interesting to note that many of the
firms that have emerged as SCM leaders had already established their
reputations in other areas beforehand.
The second thing to understand
about SCM is that it often requires
significant changes in the firm’s organizational structure. SCM
issues cut across functional areas and even business entities.
Therefore, the responsibility and authority for implementing SCM
must be placed at the highest levels of an organization.
attempt to imbed SCM within a functional unit (such as purchasing,
operations, or logistics) usually have limited success.
Third, SCM requires firms to put in
place information systems and metrics that focus on
performance across the entire supply chain.
This is because
individual units that seek to maximize their performance
without regard to the broader impact on the supply chain can
cause problems. For example, a
manufacturing unit’s decision to minimize its inventory
levels may reduce delivery performance to the end user.
Likewise, a distributor’s decision to chase highly seasonal
demand may “bullwhip” its upstream partners, causing
significant cost overruns. Putting in place the information
systems and metrics needed to make intelligent decisions in
the face of such trade-offs presents a significant challenge
to supply chain partners.
The organizations that make up the supply chain are “linked”
together through physical flows and information flows. Physical
flows involve the transformation, movement, and storage of goods and
materials. They are the most visible piece of the supply chain. But
just as important are information flows. Information flows allow the
various supply chain partners to coordinate their long-term plans,
and to control the
day-to-day flow of goods and material up and
down the supply chain.
Finally, SCM adds another layer of complexity to a firm’s strategy
development efforts. Years ago, firms could succeed by being
particularly good in one functional area, such as marketing,
operations. Then firms recognized that they had to have
sufficient capabilities across multiple functional areas
in order to survive. Nowadays, much competition occurs
between multi-firm supply chains, not just between
In addition to their debates about functional- and business-level
strategies, then, managers must now address how they will partner
with other firms in order to compete.
Some experts distinguish Supply Chain Management with
Logistics while others consider the term to be