Supply chain management
From Supply Chain Management Encyclopedia
Russian: Управление цепями поставок
Supply chain management (SCM) is a successful business practice, an effective strategy and a popular concept. According to many surveys, it is important for a growing number of companies all over the world. SCM concept is a mix of various concepts. SCM combines the goals of logistics (minimizing of total costs in supply chain) and of operations management (efficient inventory and production management), of marketing (value creation and customer satisfaction) and of relationship marketing (cooperating with partners in a supply chain), as well as of other disciplines. Hence, it is obvious that explanation of approaches to management of a network of relationships and enjoying total costs minimization with a given level of customer satisfaction a multidisciplinary approach is required. The practice of managing supply chains (followed by a theory of SCM) appeared as an answer to new economic challenges in late 1970s – early 1980s, when macroeconomic environment of a world economy stagnation after the oil crisis required efforts on developing new managerial decisions and concepts. One of the survival conditions for the companies at that time was a decrease in logistics costs. At the same time the managers found out pretty soon that the reason of dramatically increased logistics cost was not only transportation costs, but costs of safety stocks, obsolete inventories, cost of lost revenues because of out-of-stock situations, etc. The problems listed above are the problems of the bullwhip effect in supply chain. The bullwhip effect means that partners in supply chain do not have the information of real sales and have to creae safety stocks of goods and materials. The core competence paradigm, that was introduced and dominated in 1990s made this problem even worse, because companies started to concentrate on their own core competences and outsource the rest of the functions. It increased the number of actors in supply chain and made information flow more difficult. Obvious and logical decision was to organize the coordinated flow of materials and finished goods by exchanging reliable and relevant information. This concept was named a supply chain management and later developed towards more complex coordination systems and integration of core business processes. As a result supply chain differs from vertically-integrated corporation of the beginning of XX century by the fact, that supply chain consists of separate, formally independent (in reality tightly interdependent), concentrated on own core competences organizations, that have common goal to minimize costs in supply chain and maximize value for the ultimate customer.
In literature different approaches of supply chain management might be found. Some of them contradict each other. The definition basically depends on position of the author: logistics, operations management, marketing, etc. For instance, logistics and operation management specialists concentrate on optimization of business processes, on the other hand, marketing specialists – on service level and value for the customer.
Attempts to make a unified, single definitions are still not very successful. For instance, Stock and Boyer tried to make a synthetic definition on the base of 173 given definitions: “The management of a network of relationships within a firm and between interdependent organizations and business units consisting of material suppliers, purchasing, production facilities, logistics, marketing, and related systems that facilitate the forward and reverse flow of materials, services, finances and information from the original producer to final customer with the benefits of adding value, maximizing profitability through efficiencies, and achieving customer satisfaction”. However, this synthetic definition has its own disadvantages: it is not focused and too “heavy”.
Some other SCM definitions:
- Council of Supply Chain Management Professionals (CSCMP): SCM is encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.
- Mentzer et al. (2001): SCM is the systematic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.
- Larson and Rogers (1998): SCM is the coordination of activities, within and between vertically linked firms, for the purpose of serving end customers at a profit.
Supply Chain Management Frameworks
SCM frameworks or models are reference points for practitioners and researcher. Below there are two basic frameworks: SCOR and Metzer model that are most popular in specialized literature.
Supply Chain Operations Reference (SCOR)=
The Supply Chain Operations Reference (SCOR) model, developed by the Supply Chain Council (SCC) and AMR Research in 1996 is one of the most popular models. According to Supply Chain Council, this model provides a unique framework that links business processes, metrics, best practices and technology features into a unified structure to support communication among supply chain partners and to improve the effectiveness of supply chain management and related supply chain improvement activities. SCOR is used to identify, measure, reorganize and improve supply chain processes through a cyclical process that includes:
- Capturing the configuration of a supply chain
- Measuring the performance of the supply chain and comparing against internal and external
- Re-aligning supply chain processes and best practices to fulfill unachieved or changing business
objectives The SCOR model five processes: plan, source, make, deliver and return. Each process is implemented through four individual levels. The first level defines the scope and content of the model itself, as well as specifying basis for competition performance targets. At level two, companies implement their operations strategies dependent upon the configurations they choose for their supply chains. Level three defines inputs, outputs, and flows of each transactional element, and finally, level four defines the implementation of specific supply chain management practices. The source, make, and deliver processes of the SCOR model create a continuous chain of activity throughout a company’s internal operations and, potentially, across the whole inter-organizational supply chain.
The Mentzer Model
Mentzer and his colleagues defined supply chain management in this analysis as “the systematic, strategic coordination of the traditional business functions and tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole.”
According to this definition, SCM includes multiple firms (supply chain actors) and multiple business activities. The definition is accompanied with the model (see figure). The supply chain looks like a pipeline that includes supply chain flows (services, products, information, materials, money, etc.), inter-functional coordination of business functions (marketing, sales, research and development, forecasting, production, logistics, etc.), which based on trust, commitment, risk and dependence. Mentzer model assumes, that at the end of supply chain there should be two important outcomes: greater customer satisfaction at less costs due to better organization of all flows. These two outcomes form competitive advantage on other supply chains (not individual companies).
- ↑ Гиюниперо Л. и др., 2011. Десять лет исследований в сфере управления цепями поставок: прошлое, настоящее и выводы для будущего. Российский журнал менеджмента 9 (2)
- ↑ Черенков В. И. (2004) Эволюция маркетинговой теории и трансформация доминирующей парадигмы маркетинга. Вестник Санкт-Петербургского Университета. Сер. Менеджмент 2: 3-32
- ↑ Prahalad C.K. and Hamel, G (1990) The core competence of the corporation, Harvard Business Review, 68 (3): 79-91.
- ↑ Oliver K. and Webber M. (1982) Supply chain management: Logistics catches up with strategy. In: Christopher M. (ed.) Logistics, The Strategic Issues. Champan and Hall: London; 63–75.
- ↑ Croom S. R., Romano P. and Giannakis M. (2000) Supply chain management: an analytical framework for critical literature review. European Journal of Purchasing and Supply Management 7: 29–37
- ↑ Burgess K., Singh P. and Koroglu, R. (2006) Supply Chain Management: A Structured Literature Review and Implications for Future Research. International Journal of Operations and Production Management, 26, (7), 703-729.
- ↑ Lamming R., Johnsen T., Zheng J. and Harland C. (2000). An initial classification of supply networks. International Journal of Operations & Production Management, 20, (6), 675-691.
- ↑ Jüttner U., Christopher M. and Baker S. (2007) Demand chain management — integrating marketing and supply chain management / U. Jüttner, // Industrial Marketing Management. – Vol. 36, № 5. p. 377-392
- ↑ Кирюков С. И., Кротов К. В. (2007) Развитие концепции управления цепями поставок: маркетинговый подход. Вестник С.-Петербургского ун-та. Сер. Менеджмент (4): 97–111.
- ↑ Stock R., Boyer S., 2009 Developing a consensus definition of supply chain management: a qualitative study. International Journal of Physical Distribution & Logistics Management 39 (8): 690-711
- ↑ Council of Supply Chain Management Professionals (CSCMP) - www.cscmp.org
- ↑ Mentzer J.T., DeWitt W., Keebler J.S., Min S., Nix N.W., Smith C.D. and Zacharia Z.G. (2001) Defining supply chain management, Journal of Business Logistics, Vol. 22 No. 2, pp. 1-25.
- ↑ Larson P. and Rogers D. (1998) Supply chain management: definition growth and approaches, Journal of Marketing Theory and Practice, Vol. 6 No. 3, pp. 1-5
- ↑ ( Supply Chain Council, 2009)
- ↑ Lockamy III, A. and McCormack, K. (2004). Linking SCOR planning practices to supply chain performance, an exploratory study. International Journal of Operations & Business Management, 24, (12), 1192-1218.