Supply Chain Management

Supply Chain Management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers.

The philosophy of 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 concepts are tightly interconnected.

Network structure: The Network structure comprises collaboration partners in a supply chain, as well as the relationships between these players. 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.

Business Processes: 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 important business processes include Order Processing, Customer Services, Distribution, Product Development and supply, and

Management: The Management component is the 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 supply chain project, because they determine how the individual processes are managed and how they are integrated.

There are many different types of supply chains of which four main types are:

Type1: Dynamic/Low level of influence from the company in focus.

This type operates under dynamic conditions while the company in focus has only limited influence on the other participants involved in the supply chain. The dynamic condition can be explained by frequent internal process changes, due to multiple product configurations or external market conditions with a myriad of competitors as well as many new product launches.

Type2: Dynamic/high degree of influence held by the company in focus.

In this type of supply chain the focus company has power/ influence over the other participants. In this situation, the focus company will with its purchasing power or innovative image tends to become important cooperative partner for the other links in the supply chain.

Type3: Static/ focus company has a low level of influence.

This supply chain works under stable conditions, both internally and externally. Total cost effectiveness will often be the primary aspect of competition. Focus will be on increasing effectiveness within the logistics processes, including improving processes, integrating information systems, reducing inventory and making full use of capacity.

Type4: Static/ focus company has high degree of influence.

In this type of supply chain the focus company enjoys a high degree of influence over the other parties involved. This situation indicates that the dominant company can choose its cooperation partners and make the necessary decisions regarding the organization of the supply chain, as well as increasing its effectiveness.

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