The supply chain is essentially all of the companies from product creation through supplier, manufacturing, warehousing, distribution, and retail/wholesaler. This includes every step before the product or service reaches the customer. Supply chain management is the process of coordinating and optimizing the flow of all products or services, information, and finances among all players of the supply chain.

Benefits & CostsEdit



  • Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.
  • Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third party logistics.
  • Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.
  • Information technology chain operations.
  • Where-to-make and what-to-make-or-buy decisions.
  • Aligning overall organizational strategy with supply strategy.
  • It is for long term and needs resource comittement.


  • Sourcing contracts and other purchasing decisions.
  • Production decisions, including contracting, scheduling, and planning process definition.
  • Inventory decisions, including quantity, location, and quality of inventory.
  • Transportation strategy, including frequency, routes, and contracting.
  • Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.
  • Milestone payments.
  • Focus on customer demand.


  • Daily production and distribution planning, including all nodes in the supply chain.
  • Production scheduling for each manufacturing facility in the supply chain (minute by minute).
  • Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
  • Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
  • Inbound operations, including transportation from suppliers and receiving inventory.
  • Production operations, including the consumption of materials and flow of finished goods.
  • Outbound operations, including all fulfillment activities, warehousing and transportation to customers.
  • Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

Forces Affecting SCMEdit

  • Globalization
  • Mass customization
  • Price sensitivity
  • Customer focus and time to market
  • Just-in-time inventory and inventory reduction
  • Enterprise resource planning
  • Outsourcing

Other SCM termsEdit

Disintermediation - The removal of intermediaries in a supply chain. "cutting out the middle man"

Reintermediation - The reemergance of the traditional middle man in new ways.

Vendor Managed Inventory - Business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material.

Reverse Logistics - stands for all operations related to the reuse of products and materials. It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

Management IssuesEdit

  • Defining the E-supply structure
  • Differentiation
  • Order fulfillment capabilities
  • Infastructure capabilities
  • Tradeoffs?
  • Balancing all of the internal players
    • Sales and marketing
    • Production
    • Finance
    • Customer service
  • Need to ensure all employees understand processes and cooperate objectives for SCM

Quick Key TermsEdit

  • Collaborative commerce
    • Collaborative Commerce is a set of techniques that allow an organization to better manage their trade partner system — the extended enterprise. It consists of cross-company capabilities — focused on key competitive capabilities — that use new technologies to deliver improved sharing of business processes, decision-making, workflow and data with key trade partners.
  • Cash-flow cycle
    • A financial ratio showing for how long a company has to finance its own stock/inventory. It measures the number of days between the initial cash outflow (when the company pays its suppliers) to the time it receives cash from its customers and is calculated as: stock days + debtor days - creditor days.
  • Disintermediation
    • The removal of intermediaries in a supply chain. "cutting out the middle man"
  • Logistics
    • the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers
  • Order fulfillment
    • is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer.
  • Order processing
    • Order processing is the term generally used to describe the process or the work flow associated with the picking, packing and delivery of the packed item(s) to a shipping carrier.
  • Pull system
    • A pull system is where processes are based on customer demand. The concept is that each process is manufacturing each component in line with another department to build a final part to the exact expectation of delivery from the customer.
  • Push system
    • Manufacturing system in which production is based on a projected production plan and where information flows from management to the market, the same direction in which the materials flow.

Reintermediation Reverse logistics RFID tag Supply chain management (SCM) Vendor-managed inventory Warehousing


The process of planning, implementing, and controlling the efficient and effective flow of goods, services, and related information from point of origin to point of consumption.

Process and components:

The supply chain is essentially all of the companies from product creation through:





􀁺Retail / Wholesale

Until the product reaches the customer

Traditional SCM

The traditional supply chain was focused on efficiency of production gained through batch manufacturing that often resulted in excess inventories throughout the supply chain.

Internet-Enabled Supply Chain Information Flows:

In the internet enabled supply chain the customer drives the process, and information flows upstream. Reduced inventory levels, customer driven.

Why stupply chain collaboration:

Allows the product to be pulled from suppliers based on actual demand rather than pushed from suppliers based on forecast. Information sharing reduces the bullwhip effect, which causes excess inventory.