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3 Components of Supply Chain Management

3 Components of Supply Chain Management

The success of multinational companies can be attributed to their ability to deliver not only quality products but also delivering them on time, all over the world. Therefore, focus has moved from competition between firms at the same level in the production process to competition between supply chains, from raw materials to end customers. A company’s ability to create trust based and long term business relationships with customers, suppliers and other strategic partners becomes a crucial competitive parameter. The tendency towards increased integration and cooperation between the enterprises in the supply chain results in greater complexity in the management and control technology, which requires increased coordination of resources and activities.

Supply Chain Management can be divided into three components, which are tightly interconnected.

Network Structure

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Business ProcessesManagement Components

Network Structure (who are the key supply chain members)

Business Processes (What processes should be linked with each of these key supply chain members)

Management Components (What level of integration and management should be applied for each process link?)

Network Structure:

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 would demand entirely too many resources and be quite complex. Moreover, 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 the supply chain. In this way, it becomes possible to create a dialogue concerning which relationships must be developed in the future. Working towards creating and maintaining the right relationships becomes part of the business strategy.

Business Processes:

Supply Chain Management’s Business Processes components are the second element in the SCM reference framework. Business processes in SCM helps in the most important business processes such as process of planning, implementation and controlling operations of the supply chain while satisfying customer requirements as efficiently as possible. The process includes all internal functions, logistics, distributions, sourcing customer service, sales, manufacturing and finance departments in the organization. However, it also involves external suppliers that provide finished products, components, parts and assemblies and their delivery.

Management Components:

Supply Chain Management’s management components are a third element in the SCM reference framework. There are a number of management components, which span business processes and the roles of participants in the supply chain. It is of key importance to be aware of these common components in order to secure the successful completion of a supply chain project, because they determine how the individual processes are managed and how they are integrated.

The physical and technical management components can be divided into subcategories.

  • Planning and control systems
  • Process structure
  • Organizational structure
  • Information distribution
  • Production flow

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