What is Supply Chain Management? Definition, Introduction, Process & Examples | AIMS UK
Supply chain management is a critical aspect of any business. It refers to the management of the flow of goods and services, encompassing everything from the sourcing of raw materials to the delivery of finished products to end customers. A supply chain is a global network that integrates various entities, including suppliers, producers, and customers. It involves the coordinated flow of physical materials, information, and cash.
In a basic supply chain, there are four fundamental flows that connect the entities together: the flow of physical materials and services, the flow of cash, the flow of information, and the reverse flow of returned products. These flows ensure that materials are sourced, transformed, and delivered effectively and efficiently.
There are three main types of supply chain strategies: stable, reactive, and efficient reactive. A stable strategy focuses on execution efficiencies and cost performance, using simple connectivity technologies and minimal need for real-time information. A reactive strategy is suitable for meeting trade partner demand, such as the production of sports team apparel for fans when a team advances in a tournament. Finally, an efficient reactive strategy encompasses the total delivered cost of finished goods and emphasizes efficiency and cost management.
Supply chains exist across various industries, including manufacturing and services. For example, in a manufacturing supply chain, there may be multiple tiers of suppliers and distribution centers, ensuring the smooth transition of materials and products. In the service industry, supply chains also play a critical role, with various organizations like electricity providers and software houses integrating their own supply chains to deliver their services effectively.
Companies can pursue different supply chain management approaches, including vertical integration and lateral or horizontal integration. Vertical integration involves owning and controlling the entire supply chain, from production to distribution. This approach enables companies to achieve control and reduce dependency on external partners. Lateral or horizontal integration, on the other hand, involves expanding the business by acquiring similar companies within the same industry. This approach aims to increase market share and diversify the customer base.
Supply chain management has evolved through several stages, generally progressing from multiple dysfunction to an extended enterprise model. Each organization falls within these stages, with some lagging behind and others at the forefront of supply chain advancements. The ultimate goal is to achieve an integrated and efficient supply chain that optimizes the flow of goods and services.
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What is supply chain management?
- Supply chain management is the management of the flow of goods and services from their sources to their end customers. It involves the coordination of various entities and the flow of physical materials, information, and cash.
What are the different types of supply chain strategies?
- There are three main types of supply chain strategies: stable, reactive, and efficient reactive. Stable strategies focus on execution efficiencies and cost performance, reactive strategies respond to trade partner demand, and efficient reactive strategies prioritize cost management and efficiency.
How does supply chain management differ in manufacturing and services industries?
- In manufacturing industries, supply chains involve multiple tiers of suppliers and distribution centers to ensure the flow of materials and products. In the services industry, supply chains are integral to delivering services effectively, with organizations like electricity providers and software houses managing their own supply chains.
What is the difference between vertical integration and lateral integration?
- Vertical integration involves owning and controlling the entire supply chain, from production to distribution. In contrast, lateral integration involves expanding the business by acquiring similar companies within the same industry.
How does supply chain management evolve through stages?
- Supply chain management typically evolves through stages, starting from multiple dysfunction and progressing to an extended enterprise model. Each organization falls within a specific stage, with advancements aimed at achieving an integrated and efficient supply chain.