Defining supply chain management: a historical perspective and practical guidelines

Interest in supply chain management has steadily increased since the 1980s when firms saw the benefits of collaborative relationships within and beyond their own organization. Firms are finding that they can no longer compete effectively in isolation of their suppliers or other entities in the supply chain. A number of definitions of supply chain management have been proposed in the literature and in practice. This paper defines the concept of supply chain management and discusses its historical evolution. The term does not replace supplier partnerships, nor is it a description of the logistics function. The competitive importance of linking a firm’s supply chain strategy to its overall business strategy and some practical guidelines are offered for successful supply chain management. Introduction to supply chain concepts Firms can no longer effectively compete in isolation of their suppliers and other entities in the supply chain. Interest in the concept of supply chain management has steadily increased since the 1980s when companies saw the benefits of collaborative relationships within and beyond their own organization. A number of definitions have been proposed concerning the concept of “the supply chain” and its management. This paper defines the concept of the supply chain and discusses the evolution of supply chain management. The term does not replace supplier partnerships, nor is it a description of the logistics function. Industry groups are now working together to improve the integrative processes of supply chain management and accelerate the benefits available through successful implementation. The competitive importance of linking a firm’s supply chain strategy to its overall business strategy and some practical guidelines are offered for successful supply chain management. Definition of supply chain Various definitions of a supply chain have been offered in the past several years as the concept has gained popularity. The APICS Dictionary describes the supply chain as: 1 the processes from the initial raw materials to the ultimate consumption of the finished product linking across supplieruser companies; and 2 the functions within and outside a company that enable the value chain to make products and provide services to the customer (Cox et al., 1995). Another source defines supply chain as, the network of entities through which material flows. Those entities may include suppliers, carriers, manufacturing sites, distribution centers, retailers, and customers (Lummus and Alber, 1997). The Supply Chain Council (1997) uses the definition: “The supply chain – a term increasingly used by logistics professionals – encompasses every effort involved in producing and delivering a final product, from the supplier’s supplier to the customer’s customer. Four basic processes – plan, source, make, deliver – broadly define these efforts, which include managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.” Quinn (1997) defines the supply chain as “all of those activities associated with moving goods from the raw-materials stage through to the end user. This includes sourcing and procurement, production scheduling, order processing, inventory management, transportation, warehousing, and customer service. Importantly, it also embodies the information systems so necessary to monitor all of those activities.” In addition to defining the supply chain, several authors have further defined the concept of supply chain management. As defined by Ellram and Cooper (1993), supply chain management is “an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer”. Monczka and Morgan (1997) state that “integrated supply chain management is about going from the external customer and then managing all the processes that are needed to provide the customer with value in a horizontal way”. They believe that supply chains, not firms, compete and that those who will be the strongest competitors are those that “can provide management and leadership to the fully integrated supply chain including external customer as well as prime suppliers, their suppliers, and their suppliers’ suppliers”. From these definitions, a summary definition of the supply chain can be stated as: all the activities involved in delivering a product from raw material through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the customer, and the information systems necessary to monitor all of these activities. Supply chain management coordinates and integrates all of these activities into a seamless process. It links all of the partners in the chain including departments