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 A supply chain can be defined as a set of three or more companies directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer.

Supply Chain Management 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 imposing the long-term performance of the individual companies and the supply chain as a whole.

The definition of Supply Chain Management focuses on management of relationships as means of achieving better results for all members of the supply chain, including customers.

As a philosophy Supply Chain Management takes a systems approach to viewing the channel as a single entity, rather than as a set of fragmented parts, each performing its own function. There are three concepts in Supply Chain Management. These three concepts are tightly interconnected.

• Network Structure
• Business Processes
• Management

The Network structure comprises the most important collaboration partners in a supply chain, as well as the relationships between these players. It is neither possible nor desirable to establish a SCM cooperative network that includes all participants in a business network. It is important to focus available resources on the relations that are of strategic importance for the competitiveness of the business. For many businesses, it is a novel challenge to choose and work in a structured manner with business relationships. A good way to start is to describe the roles the business fills today and the roles the business wishes to fill in the future in terms of supply chain. In this way, it is possible to create a dialogue concerning which relationships must be developed in the future. In order to support this process, business relations can be put in general categories. There are four main categories.

1. Relationships that the business in focus wishes to lead and coordinate.
2. Relationships that are non-critical for the business in focus, but which still should be monitored in order to ensure that the activities are completed by the other businesses involved in the network.
3. Relationships that the business in focus does not deem to be critical or worth sacrificing management or monitoring resources on.
4. Relationships to other supply chains. A business can simultaneously be a supplier for several internally competing supply chains. These relationships are nor viewed as part of the relationships in the actual supply chain, but can, of course, have an important influence on the supply chain’s effectiveness and competitiveness.

Business Processes encompass the activities and flows of information that are connected with conducting materials, products and services through the supply chain and on to customers. Examples of some important business processes:

Order processing: This business process includes all of the activities that are tied in with expediting customers’ orders like placement of the order, receiving of the order, credit check, actual expedition of the order, the distribution and finally, the customer receiving the order and invoicing. The total time that passes between when the customer places their order until the customer receives the desired goods is often referred to as the order cycle.

Customer service: The term customer service includes a number of services before, during and after the actual sales transaction. Pre-services, for example, be advising, a flexible and easy ordering process and easily accessible product information. Service possibilities during the actual order process include a short order cycle, a strong level of warehouse service and electronically accessible delivery information (track and trace, proof of delivery). Service after the transaction may encompass various forms of customer support, including installation and assistance in the use of product, maintenance service, guarantees and return services in the event of error or deficiency.

Distribution: Distribution is specified as the process starting with the compilation of the products until their receipt by the customer. In some situations, distribution can also include replacement parts and return transport of damaged, outdated or scrapped products. Distribution can at times consist of different levels of warehousing, including geographically dependent warehousing. Increasingly, external cooperative partners manage distribution in Third Party Logistics business, which demands great amounts of cooperation and a systematic assessment of the service level as well as logistics costs.

Product development/ Time to market: Previously, product development was an activity carried out in isolation from the daily production. Today, though, product development normally involves close communication with ongoing production. This tendency is demonstrated through such terms as concurrent engineering, which involves the initiation of production in coordination with continuing improvements of processes and working procedures. Nonetheless, there is often a key supplier, who is included early on in the product development sequence as a sparring partner during the development of prototypes, and to aid in the choosing of components as well as materials. In addition, customer focus groups are often used to judge and comment on the functionality and market relevance of product ideas. This process ensures that non-viable product ideas are eliminated as soon as possible, increasing the possibility of a high hit rate in the company’s product development.

Supply: This process includes all of the activities from choosing a vendor, coming to an agreement on framework contracts and the continued organizing of purchasing. The supply process changed from being characterized by routine to becoming a strategic process. One of the explanations for this change is the increasing tendency to outsource production processes to the supplier link in the supply chain. Establishing framework agreements/contracts makes it possible to initiate an optimization of all supply processes, for example, by exchanging information on product plans, warehouse inventories and sales forecasts, as well as creating procedures for quality control in order to avoid repetitive procedures.

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