What Is Supply Chain Management?

Supply Chain Management is a system that synchronizes the efforts of all parties—suppliers, manufacturers, distributors, dealers, customers, and so on—involved in meeting a customer’s needs. It forges closer relationships among all links in the value chain to deliver the right products to the right places at the right times. The goal is to establish such strong bonds of connection and trust among all parties that they can effectively function as a single unit, aligned to streamline business processes and achieve total customer satisfaction.

In response to a host of external forces (e.g., trade wars, demand and supply shortfalls), Supply Chain Management increasingly goes beyond reducing cost and inventory and improving service and quality, and includes developing resilience, creating responsible (e.g., sustainable, traceable) operations, and winning on responsiveness. Supply Chain Management capitalizes on the rise of digital technologies and automation to provide seamless, real-time visibility, accelerated processes, and improved flexibility and decision making.

How Is Supply Chain Management Implemented?

Companies typically implement Supply Chain Management in four stages:

• Stage One seeks to increase the level of trust among vital links in the supply chain. Managers learn to treat former adversaries as valuable partners. This stage often leads to longer commitments with preferred partners.
• Stage Two increases the exchange of information. It creates more accurate, up-to-date knowledge of demand forecasts, inventory levels, capacity utilization, production schedules, delivery dates, and other data that could help supply chain partners improve performance.
• Stage Three expands efforts to manage the supply chain as one overall process rather than dozens of independent functions. It leverages the core competencies of each player, automates information exchange, changes management processes and incentive systems, eliminates unproductive activities, improves forecasting, reduces inventory levels, cuts cycle times, and involves customers more deeply in the Supply Chain Management process.
• Stage Four identifies and implements radical ideas to transform the supply chain with improved processes, digitization, or simplification. It develops a view of future supply chain performance, considering innovative solutions to address current constraints as well as future needs. Scenarios are typically developed for transforming the performance of the supply chain that span different risk and benefit profiles. For leading scenarios, initiatives are identified, sequenced, and piloted.

Related Topics

• Borderless Corporation

• Collaborative Commerce

• Value Chain Analysis

 

What Are Common Uses of Supply Chain Management?

Recognizing that value is leaking out of the supply chain, but that only limited improvement can be achieved by any single company, managers turn to Supply Chain Management to help them deliver products and services faster, better, and less expensively.

Effective supply chain management can:

• Accelerate revenue growth: Increases ability to rapidly serve changes in market demand and expand output capacity through operation optimization
• Boost customer satisfaction and advocacy: Increases customer collaboration through feedback loops and perfect order rate by eliminating operational silos
• Unlock savings and cash flow: Reduces manufacturing and logistics costs through outsourcing and redesigning routes. Also helps optimize safety stock levels.
• Minimize risk and increase reliability: Helps enhance forecast accuracy with improved tools and reduces disruptions by building buffers within network.
• Improve environmental and social impacts

• Selected references (click to expand)

  Chopra, Sunil. Supply Chain Management: Strategy, Planning, and Operation. Pearson Education, 2019.

  Ferdows, Karsa, Hau L. Lee and Xiande Zhao. “How to Turn a Supply Chain Platform into an Innovation Engine.” Harvard Business Review, July-August 2022.

  Gaur, Vishal and Abhinav Gaiha. “Building a Transparent Supply Chain.” Harvard Business Review, May/June 2020.

  Hugos, Michael H. Essentials of Supply Chain Management. Wiley, 2018.

  Panwar, Rajat, Jonatan Pinkse, and Valentina De Marchi. “The Future of Global Supply Chains in a Post-COVID-19 World.” California Management Review, 64(2), 5–23, January 2022.

  Sanders, N. R. “How to Use Big Data to Drive Your Supply Chain.” California Management Review, 58(3), 26–48, May 2016.

  Sheffi, Yossi. The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19. MIT CTL Media, 2020.

  Sinha, Amit, Ednilson Bernardes, Rafael Calderon, and Thorsten Wuest. Digital Supply Networks: Transform Your Supply Chain and Gain Competitive Advantage with Disruptive Technology and Reimagined Processes, McGraw Hill, 2020.

  Stanton, Daniel. Supply Chain Management for Dummies. Wiley, 2021.

  Searcy, Cory, Pavel Castka, Jakki Mohr, and Sönke Fischer. “Transformational Transparency in Supply Chains: Leveraging Technology to Drive Radical Change.” California Management Review, 65(1), 19–43, November 2022.

  Vandeput, Nicolas. Data Science for Supply Chain Forecasting, De Gruyter, 2021.

  Villena, Verónica H. and Dennis A. Gioia. “A More Sustainable Supply Chain.” Harvard Business Review, March/April 2020.

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