Supply chain

From Supply Chain Management Encyclopedia

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'''Russian: [http://ru.scm.gsom.spbu.ru/Цепь_поставок Цепь поставок]'''
'''Russian: [http://ru.scm.gsom.spbu.ru/Цепь_поставок Цепь поставок]'''
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The definition of "supply chain" seems to be more common across authors than the definition
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Supply chain is a set of several independent companies that are involved in sourcing of materials, manufacturing, distributing and selling the product for ultimate customer. The term supply chain appeared along with the term “[[supply chain management]]”, however supply chains exist whenever they are managed or not. Unlike the definitions of supply chain management, the definitions of supply chain are rather homogeneous:
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of "supply chain management" (Cooper and Ellram 1993; La Londe and Masters 1994: Lambert. Stock,
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*A supply chain is a set of firms that pass materials forward.<ref>La Londe and Masters (1994) Emerging Logistics Strategies: Blueprints for the Next Century, International Journal of Physical Distribution & Logistics Management</ref>
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and Ellram 1998). La Londe and Masters proposed that a supply chain is a set of firms that pass materials
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*A supply chain is the alignment of firms that bring products or services to market<ref>Stock J., Lambert D. and Ellram L. (1998) Fundamentals of Logistics Management </ref>
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forward. Normally, several independent firms are involved in manufacturing a product and placing
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*A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request<ref>Chopra S. and Meindl P. (2003) Supply Chain Management: Strategy, Planning, and Operations</ref>
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it in the hands of the end user in a supply chain—raw material and component producers, product
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*A supply chain is a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, materials and/or information from a source to a customer.<ref name=Mentzer>Mentzer J., DeWitt W., Keebler J., Soonhoong M., Nix N. Smith C., Zacharia Z. (2001) Defining supply chain management Journal of Business Logistics, Vol. 22 Issue 2, p1-25,</ref>
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assemblers, wholesalers, retailer merchants and transportation companies are all members of a
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It is important to note that these definitions of supply chain include the final consumer as part of it. Other authors see supply chain as a network of organizations, which is more closely to the reality:
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supply chain (La Londe and Masters 1994). By the same token, Lambert, Stock, and Ellram define
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*A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials into intermediate and finished products, and the distribution of these finished products to customers<ref>Ganeshan R. and Harrison T.P. (1993) An introduction to supply chain management. </ref>
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a supply chain as the alignment of firms that brings products or services to market. Note that these
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* A supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer.<ref>Christopher M. (1992) Logistics and Supply Chain Management: Strategies for Reducing Costs and Improve Services. – London: Financial Times; Pitman. – 320 p.</ref>
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concepts of supply chain include the final consumer as part of the supply chain.
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It is also important to note that any one organization can be a part of numerous supply chains.
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Another definition notes a supply chain is the network of organizations that are involved,
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through upstream and downstream linkages, in the different processes and activities that produce value
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in the form of products and services delivered to the ultimate consumer (Christopher 1992). In
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other words, a supply chain consists of multiple firms, both upstream (i.e., supply) and downstream
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(i.e., distribution), and the ultimate consumer.
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==Types of channel relationships==
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The relationships between the actors (buyers and sellers) play a key role in supply chains. The supply chain type depends on what kind of relationships are between players. There are two classifications of relationship types (or strategies) below: one given by J. Mentzer et al. (2001)<ref name=Mentzer></ref> and the other given by N. Campbell (2002).<ref>Campbell N. (2002) An international approach to organizational buying behavior. In: Ford D. (ed.). Understanding Business Marketing and Purchasing. 3rd ed. Thomson Learning: London; 389-401</ref>
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Given these definitions, for the purposes of this paper, a supply chain is defined as a set of three
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==Types of relationships by J. Mentzer==
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or more entities (organizations or mdividuab} directly involved in the upstream and downstream flows
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According to Mentzer and his colleagues, there are three degrees of supply chain complexity: a "direct supply chain" an "extended supply chain" and an "ultimate supply chain" (see the figure).
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of products, sen-icesjinances. and/or information from a .source to a customer.
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*'''A direct supply chain''' consists of a company, a supplier, and a customer involved in the upstream and/or downstream flows of products, services, finances, and/or information. This might be either very big vertically integrated corporation that doesn’t have important second tier suppliers or small one without resources or need to monitor second tier suppliers.
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*'''An extended supply chain''' includes suppliers of the immediate supplier and customers of the immediate customer, all involved in the upstream and/or downstream flows of products, services, finances, and/or information. This is traditional supply chain.
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*'''An ultimate supply chain''' includes all the organizations involved in all the upstream and downstream flows of products, services, finances, and information from the ultimate supplier to the ultimate customer.
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Encompassed within this definition, we can identify three degrees of supply chain complexity:
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====Types of relationships by N. Campbell====
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a "direct supply chain." an "extended supply chain," and an "ultimate supply chain." A direct supply
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chain consists of a company, a supplier, and a customer involved in the upstream and/or downstream
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flows of products, services, finances, and/or information (Figure 1 a). An extended supply chain
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includes suppliers of the immediate supplier and customers of the immediate customer, all involved
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in the upstream and/or downstream flows of products, services, finances, and/or information (Figure
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lbj. An ultimate supply chain includes all the organizations involved in all the upstream and
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downstream flows of products, services, finances, and information from the ultimate supplier to the
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ultimate customer.
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Figure I c illustrates the complexity that ultimate supply chains can reach. In this example, a third
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party financial provider may be providing financing, assuming some of the risk, and offering financial
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advice; a third party logistics (3PL) provider is performing the logistics activities between two
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of the companies; and a market research finn is providing information about the ultimate customer
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to a company well back up the supply chain. This very briefly illustrates some of the many functions
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that complex supply chains can and do perform.
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Although we will address this point in greater depth later in this paper, it is important to realize
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that implicit within these definitions is the fact that supply chains exist whether they are managed
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or not. If none of the organizations in Figure 1 actively implements any of the concepts discussed in
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this paper to manage the supply chain, the supply chain—as a phenomenon of business—still exists.
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Thus, we draw a definite distinction between supply chains as phenomena that exist in business and
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the management of those supply chaitis. The former is simply something that exists (often also
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referred to as distribution channels), while the latter requires overt management efforts by the
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organizations within the supply chain.
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Given the potential for countless alternative supply chain configurations, it is important to
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note that any one organization can be part of numerous supply chains. Wal-Mart, for example, can
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be part of the supply chain for candy, for clothing, for hardware, and for many other products. This
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multiple supply chain phenomenon begins to explain the network nature that many supply chains possess.
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For example, AT&T might find Motorola to be a cu.stomer in one supply chain, a partner in another,
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a supplier in a third, and a competitor in still a fourth supply chain.
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Note also that within our definition of supply chain, the final consumer is considered a member
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of the supply chain. This point is important because it recognizes that retailers such as Wai-Man
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can be part of the upstream and downstream flows that constitute a supply chain.
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A supply chain is the alignment of firms that bring products or services to market (Stock, Lambert, Ellram, 1998)
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N. Campbell described three types of relationship strategies:
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A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request (Chopra, Meindl, 2003)
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*'''Competitive''' – independent relationships; the price is determined by competitive market forces,
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A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials into intermediate and finished products, and the distribution of these finished products to customers (Ganeshan, Harrison, 1995)
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*'''Cooperative''' – interdependent relationships; may create new value,
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*'''Command''' – dependent; one party has a dominant position.
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==Types of channel relationships==
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Any of this strategies might be implemented by one of the sides: by buyer or by seller, depending on what bargaining power does it have, what are the plans of this player, etc. Some parameters are listed below:
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[[File:supply chain types.png|thumb|Types of channel relationships]]
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*Product
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**Frequency of purchase
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**Switching cost due to physical and human investments
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**Product complexity
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**Industry characteristics
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*Concentration
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**Number of alternative partners
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**Intensity of competition
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**Traditions and norms
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*Company characteristics
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**Relative size
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**Preferred infrastructure style
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**Relative brand awareness
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**Centralization of purchasing
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*Individual characteristics
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**Relative brand awareness
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**Preferred interaction style
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**Perceived importance of the purchase
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**Risk aversion
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{| border="1"
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!colspan="5"|Relatioship strategies and recommendations
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|-
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| Buyer's strategy || Seller'strategy || Combination title || Recommendation for buyer || Recommendation for seller
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|-
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|  Competitive|| Competitive || Perfect market || Play the market, Standardize requirements || Take it or leave it, Try to obtain lower costs, Try to differentiate
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|-
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|  Competitive || Command || Sellers’s market || Accept gracefully, Buy jointly, Exchange information with other buyers,  Complain, agitate, Encourage competitors || Take it or leave it, Form a cartel, Legitimize, Standardize the product
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|-
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|  Command || Competitive || Buyer’s market  || Put out trends; Play the market || Competitive bidding; Try to obtain lower costs or differentiate r
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|-
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|  Cooperative || Cooperative || Domesticated market || Adapt, cooperate, work together || Customize, specialize, differentiate, innovate
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|-
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|  Cooperative || Command || Captive market || Learn from the supplier || Educate the buyer
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|-
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|  Command || Cooperative || Subcontract market || Educate the supplier || Learn from the buyer
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|-
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|}
==References==
==References==
<references/>
<references/>
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KK
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[[Category:Supply Chain Strategy]]
[[Category:Supply Chain Strategy]]

Latest revision as of 15:24, 23 August 2011

Russian: Цепь поставок

Supply chain is a set of several independent companies that are involved in sourcing of materials, manufacturing, distributing and selling the product for ultimate customer. The term supply chain appeared along with the term “supply chain management”, however supply chains exist whenever they are managed or not. Unlike the definitions of supply chain management, the definitions of supply chain are rather homogeneous:

  • A supply chain is a set of firms that pass materials forward.[1]
  • A supply chain is the alignment of firms that bring products or services to market[2]
  • A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request[3]
  • A supply chain is a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, materials and/or information from a source to a customer.[4]

It is important to note that these definitions of supply chain include the final consumer as part of it. Other authors see supply chain as a network of organizations, which is more closely to the reality:

  • A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials into intermediate and finished products, and the distribution of these finished products to customers[5]
  • A supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer.[6]

It is also important to note that any one organization can be a part of numerous supply chains.

Contents

Types of channel relationships

The relationships between the actors (buyers and sellers) play a key role in supply chains. The supply chain type depends on what kind of relationships are between players. There are two classifications of relationship types (or strategies) below: one given by J. Mentzer et al. (2001)[4] and the other given by N. Campbell (2002).[7]

Types of relationships by J. Mentzer

According to Mentzer and his colleagues, there are three degrees of supply chain complexity: a "direct supply chain" an "extended supply chain" and an "ultimate supply chain" (see the figure).

  • A direct supply chain consists of a company, a supplier, and a customer involved in the upstream and/or downstream flows of products, services, finances, and/or information. This might be either very big vertically integrated corporation that doesn’t have important second tier suppliers or small one without resources or need to monitor second tier suppliers.
  • An extended supply chain includes suppliers of the immediate supplier and customers of the immediate customer, all involved in the upstream and/or downstream flows of products, services, finances, and/or information. This is traditional supply chain.
  • An ultimate supply chain includes all the organizations involved in all the upstream and downstream flows of products, services, finances, and information from the ultimate supplier to the ultimate customer.

Types of relationships by N. Campbell

N. Campbell described three types of relationship strategies:

  • Competitive – independent relationships; the price is determined by competitive market forces,
  • Cooperative – interdependent relationships; may create new value,
  • Command – dependent; one party has a dominant position.

Any of this strategies might be implemented by one of the sides: by buyer or by seller, depending on what bargaining power does it have, what are the plans of this player, etc. Some parameters are listed below:

  • Product
    • Frequency of purchase
    • Switching cost due to physical and human investments
    • Product complexity
    • Industry characteristics
  • Concentration
    • Number of alternative partners
    • Intensity of competition
    • Traditions and norms
  • Company characteristics
    • Relative size
    • Preferred infrastructure style
    • Relative brand awareness
    • Centralization of purchasing
  • Individual characteristics
    • Relative brand awareness
    • Preferred interaction style
    • Perceived importance of the purchase
    • Risk aversion
Relatioship strategies and recommendations
Buyer's strategy Seller'strategy Combination title Recommendation for buyer Recommendation for seller
Competitive Competitive Perfect market Play the market, Standardize requirements Take it or leave it, Try to obtain lower costs, Try to differentiate
Competitive Command Sellers’s market Accept gracefully, Buy jointly, Exchange information with other buyers, Complain, agitate, Encourage competitors Take it or leave it, Form a cartel, Legitimize, Standardize the product
Command Competitive Buyer’s market Put out trends; Play the market Competitive bidding; Try to obtain lower costs or differentiate r
Cooperative Cooperative Domesticated market Adapt, cooperate, work together Customize, specialize, differentiate, innovate
Cooperative Command Captive market Learn from the supplier Educate the buyer
Command Cooperative Subcontract market Educate the supplier Learn from the buyer

References

  1. La Londe and Masters (1994) Emerging Logistics Strategies: Blueprints for the Next Century, International Journal of Physical Distribution & Logistics Management
  2. Stock J., Lambert D. and Ellram L. (1998) Fundamentals of Logistics Management
  3. Chopra S. and Meindl P. (2003) Supply Chain Management: Strategy, Planning, and Operations
  4. 4.0 4.1 Mentzer J., DeWitt W., Keebler J., Soonhoong M., Nix N. Smith C., Zacharia Z. (2001) Defining supply chain management Journal of Business Logistics, Vol. 22 Issue 2, p1-25,
  5. Ganeshan R. and Harrison T.P. (1993) An introduction to supply chain management.
  6. Christopher M. (1992) Logistics and Supply Chain Management: Strategies for Reducing Costs and Improve Services. – London: Financial Times; Pitman. – 320 p.
  7. Campbell N. (2002) An international approach to organizational buying behavior. In: Ford D. (ed.). Understanding Business Marketing and Purchasing. 3rd ed. Thomson Learning: London; 389-401
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