Blooger and writer Ebere Eze in a short reminder from her searches in google,decided to share them herewhile stressing about what she read with regards to supply chain and Logistics and its effects in the Nigerian Economy.
Enjoy...
Origin
of the term and definitions
In
1982, Keith Oliver,
a consultant at Booz Allen Hamilton introduced the term
"supply chain management" to the public domain in an interview for
the Financial Times.[10]
In
the mid-1990s, more than a decade later, the term "supply chain
management" gained currency when a flurry of articles and books came out
on the subject. Supply chains were originally defined as encompassing all
activities associated with the flow and transformation of goods from raw
materials through to the end user, as well as the associated information flows.
Supply chain management was then further defined as the integration of supply
chain activities through improved supply-chain relationships to achieve a
competitive advantage.[10]
In
the late 1990s, "supply-chain management" (SCM) rose to prominence,
and operations managers began to use it in their titles with increasing
regularity.
Other
commonly accepted definitions of supply-chain management include:
- The management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, company, resellers, and final consumers.
- The systematic, strategic coordination of traditional business functions and tactics across all business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.
- A customer-focused definition is given by Hines (2004:p76): "Supply chain strategies require a total systems view of the links in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence, costs must be lowered throughout the chain by driving out unnecessary expenses, movements, and handling. The main focus is turned to efficiency and added value, or the end user's perception of value. Efficiency must be increased, and bottlenecks removed. The measurement of performance focuses on total system efficiency and the equitable monetary reward distribution to those within the supply chain. The supply-chain system must be responsive to customer requirements."
- The integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders (Lambert, 2008).
- According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries, third-party service providers, or customers. Supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.[citation needed]
A
supply chain, as opposed to supply-chain management, is a set of organizations
directly linked by one or more upstream and downstream flows of products,
services, finances, or information from a source to a customer. Supply chain
management is the management of such a chain.[15]
Supply chain management software
includes tools or modules used to execute supply chain transactions, manage
supplier relationships, and control associated business processes.[citation needed]
Supply-chain
event management (SCEM) considers all possible events and factors that can
disrupt a supply chain. With SCEM, possible scenarios can be created and
solutions devised.[citation needed]
In
many cases, the supply chain includes the collection of goods after consumer
use for recycling. Including third-party logistics or other gathering agencies
as part of the RM re-patriation process is a way of illustrating the new
endgame strategy.
Organizations
increasingly find that they must rely on effective supply chains, or networks,
to compete in the global market and networked economy. In Peter Drucker's
(1998) new management paradigms, this concept of business relationships extends
beyond traditional enterprise boundaries and seeks to organize entire business
processes throughout a value chain of multiple companies.
In
recent decades, globalization, outsourcing, and information technology have enabled many
organizations, such as Dell
and Hewlett Packard, to successfully operate
collaborative supply networks in which each specialized business partner
focuses on only a few key strategic activities (Scott, 1993). This
inter-organisational supply network can be acknowledged as a new form of
organisation. However, with the complicated interactions among the players, the
network structure fits neither "market" nor "hierarchy"
categories (Powell, 1990). It is not clear what kind of performance impacts
different supply-network structures could have on firms, and little is known
about the coordination conditions and trade-offs that may exist among the
players. From a systems perspective, a complex network structure can be
decomposed into individual component firms (Zhang and Dilts, 2004).
Traditionally, companies in a supply network concentrate on the inputs and
outputs of the processes, with little concern for the internal management
working of other individual players. Therefore, the choice of an internal
management control structure is known to impact local firm performance
(Mintzberg, 1979).
In
the 21st century, changes in the business environment have contributed to the
development of supply-chain networks. First, as an outcome of globalization and
the proliferation of multinational companies, joint ventures, strategic
alliances, and business partnerships, significant success factors were
identified, complementing the earlier "just-in-time", lean manufacturing, and agile manufacturing practices. Second,
technological changes, particularly the dramatic fall in communication costs (a
significant component of transaction costs), have led to changes in
coordination among the members of the supply chain network (Coase, 1998).
Many
researchers have recognized supply network structures as a new organisational
form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
Corporation", "Global Production Network", and
"Next Generation Manufacturing System". In general, such a structure
can be defined as "a group of semi-independent organisations, each with
their capabilities, which collaborate in ever-changing constellations to serve
one or more markets in order to achieve some business goal specific to that
collaboration" (Akkermans, 2001).
Supply-chain
management is also important for organizational learning. Firms with
geographically more extensive supply chains connecting diverse trading cliques
tend to become more innovative and productive. The security-management system
for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related
standards published jointly by the ISO and the IEC. Supply-Chain
Management draws heavily from the areas of operations management, logistics,
procurement, and information technology, and strives for an integrated
approach.
The purpose of Supply Chain Management
(SCM) is to keep chaos at bay – synchronizing the activities of the network.
All SCM or central planning processes created to manage an organization's
demand/supply network consists of three primary activities, as well as two
secondary activities.
Supply chain management (SCM) is a
concept that has flourished in manufacturing,
originati
ng from Just In Time (JIT)
production and logistics. Today, SCM represents an autonomous
managerial concept, although still
largely dominated by logistics (Ruben and Lauri, 2009). A supply
chain is made up of several business
entities (suppliers, manufactu
rers, wholesalers, distributors, retailers
and customers) concerned with ensuring the flow of raw materials, component
parts or
finished goods from the source to
the final destination, organizations can no longer stand aloof fro
m these business entities. As stated
by Gunasekaran et al. (2003) companies cannot run away from
being part and parcel of SCM in
either operational (traditionally, similar to the concept of
commerce) or strategic level of
implementation. In the traditional way, companies just buy the
raw material, process it to become
final product and distribute it to the customers. At the strategic level
of implementation, the focus is more
toward fulfilling customer’s requirement and satisfying them.
A broad base of
business skills, knowledge of supply chain processes, and relevant
internship/work experience will give you ample opportunity to begin your career
with a manufacturer, retailer, carrier, third party logistics firm, or other
organization. You will likely begin as a management trainee, analyst, or front
line supervisor. As you demonstrate your managerial capabilities, you can
progress to SCM positions of greater responsibility. You may also decide to
gain experience in other parts of the organization.
Potential SCM Employers
- 3PL Firms – A third-party logistics (3PL) provider is a firm specializing in providing logistics services. Clients can employ these 3PL firms to manage and/or execute required logistics activities. Asset-based 3PLs own equipment and facilities that are used to provide a variety of supply chain services to their customers. Non-asset based 3PLs focus on advising clients on supply chain operations and can arrange to provide transportation, warehousing, and other similar 3PL services. 3PL usage has steadily risen since the early 1990s as organizations have become more aware of the critical importance of effective logistics and supply chain management practices.
- Consulting Firms – A consulting firm offers knowledge and expertise to customers in need of supply chain management assistance. These firms can offer a broad range of services, but oftentimes they focus on helping to advise the client on supply chain practices as opposed to assisting with the actual execution of supply chain related processes. These types of firms can help to engineer a specific supply chain network design, provide insight into how to optimize a function, or simply review current supply chain practices and provide suggestions for improvement.
- Government Agencies – An agency operating on behalf of a Federal, State, or Local governmental entity or municipality that requires the management of supply chains. Government entities oftentimes must manage the supply and acquisition of items, as well as their storage, and distribution. For example, the Department of Defense, Federal Emergency Management Agency, and many other governmental entities are regularly confronted with supply chain management issues such as inventory analysis, procurement, and transportation.
- Manufacturing and Production Companies – Manufacturers produce products for resale to customers. Their customer may be another company, or an individual consumer, or both. For example, an automotive tire manufacturer may simultaneously serve as a supplier to the large automotive maker and also be a source of tires to a retail outlet targeting individual consumers who wish to replace worn tires on their used vehicle. Manufacturing firms can produce a wide variety of products for sale or resale to a wide range of customers.
- Retailers and Distributors – Retailers and distributors are product resellers. They act as middlemen in the supply chain, improving access to markets for manufacturers and creating wide product assortments for customers. Major retailers recognize the importance of SCM to their success and take great strides to effectively manage inventory, control transportation costs, and provide exceptional customer service through high in-stock availability.
- Service Firms – A service firm provides expertise to customers requiring assistance in a particular area. Supply chain planning and execution is supported by firms offering professional services such as finance, commercial real estate, or executive recruiting. Other service firms have a need for supply chain expertise for their own operations to be successful. As a result, supply chain job opportunities exist in the service sector with banks, hotels, restaurant chains, and others.
- Transport Company – Transportation companies that provides freight delivery services. These companies exist in all modes of transportation (air, water, motor, rail, or even pipeline). In fact, many transportation firms have expertise in multiple modes and provide intermodal transportation services to their customers. Transportation companies provide a vital link in most supply chains since they help to move raw materials, component parts, and other types of products through the supply chain.
- Universities and Educational Institutions – These entities provide expertise and distribute knowledge to clients or students with a desire to enhance their level of supply chain management knowledge. These types of organizations typically work to further the discipline in part by expanding on the knowledge base of the discipline by combining teaching, industry partnerships, and research.
The Importance of Supply Chain
Management
It is well known that supply chain
management is an integral part of most businesses and is essential to company
success and customer satisfaction.
Boost Customer Service
- Customers expect the correct product assortment and quantity to be delivered.
- Customers expect products to be available at the right location. (i.e., customer satisfaction diminishes if an auto repair shop does not have the necessary parts in stock and can’t fix your car for an extra day or two).
- Right Delivery Time – Customers expect products to be delivered on time (i.e., customer satisfaction diminishes if pizza delivery is two hours late or Christmas presents are delivered on December 26).
- Right After Sale Support – Customers expect products to be serviced quickly. (i.e., customer satisfaction diminishes when a home furnace stops operating in the winter and repairs can’t be made for days)
Reduce Operating Costs
- Decreases Purchasing Cost – Retailers depend on supply chains to quickly deliver expensive products to avoid holding costly inventories in stores any longer than necessary. For example, electronics stores require fast delivery of 60” flat-panel plasma HDTV’s to avoid high inventory costs.
- Decreases Production Cost – Manufacturers depend on supply chains to reliably deliver materials to assembly plants to avoid material shortages that would shutdown production. For example, an unexpected parts shipment delay that causes an auto assembly plant shutdown can cost $20,000 per minute and millions of dollars per day in lost wages.
- Decreases Total Supply Chain Cost – Manufacturers and retailers depend on supply chain managers to design networks that meet customer service goals at the least total cost. Efficient supply chains enable a firm to be more competitive in the market place. For example, Dell’s revolutionary computer supply chain approach involved making each computer based on a specific customer order, then shipping the computer directly to the customer. As a result, Dell was able to avoid having large computer inventories sitting in warehouses and retail stores which saved millions of dollars. Also, Dell avoided carrying computer inventories that could become technologically obsolete as computer technology changed rapidly.
Improve Financial Position
- Increases Profit Leverage – Firms value supply chain managers because they help control and reduce supply chain costs. This can result in dramatic increases in firm profits. For instance, U.S. consumers eat 2.7 billion packages of cereal annually, so decreasing U.S. cereal supply chain costs just one cent per cereal box would result in $13 million dollars saved industry-wide as 13 billion boxes of cereal flowed through the improved supply chain over a five year period.
- Decreases Fixed Assets – Firms value supply chain managers because they decrease the use of large fixed assets such as plants, warehouses and transportation vehicles in the supply chain. If supply chain experts can redesign the network to properly serve U.S. customers from six warehouses rather than ten, the firm will avoid building four very expensive buildings.
- Increases Cash Flow – Firms value supply chain managers because they speed up product flows to customers. For example, if a firm can make and deliver a product to a customer in 10 days rather than 70 days, it can invoice the customer 60 days sooner.
Lesser
known, is how supply chain management also plays a critical role in society.
SCM knowledge and capabilities can be used to support medical missions, conduct
disaster relief operations, and handle other types of emergencies.
Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how to move essential products to people in need as efficiently as possible.
Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how to move essential products to people in need as efficiently as possible.
Societal
Roles of SCM
Ensure Human Survival
- SCM Helps Sustains Human Life – Humans depend on supply chains to deliver basic necessities such as food and water. Any breakdown of these delivery pipelines quickly threatens human life. For example, in 2005, Hurricane Katrina flooded New Orleans, LA leaving the residents without a way to get food or clean water. As a result, a massive rescue of the inhabitants had to be made. During the first weekend of the rescue effort, 1.9 million meals and 6.7 million liters of water were delivered.
- SCM Improves Human Healthcare – Humans depend on supply chains to deliver medicines and healthcare. During a medical emergency, supply chain performance can be the difference between life and death. For example, medical rescue helicopters can save lives by quickly transporting accident victims to hospitals for emergency medical treatment. In addition, the medicines and equipment necessary for treatment will be available at the hospital as a result of excellent supply chain execution
- SCM Protects Humans from Climate Extremes – Humans depend on an energy supply chain to deliver electrical energy to homes and businesses for light, heat, refrigeration and air conditioning. Logistical failure (a power blackout) can quickly result in a threat to human life. For example, during a massive East Coast ice storm in January 1998, 80,000 miles of electrical power lines fell resulting in no electricity for 3,200,000 Montreal, Quebec residents. Due to extreme cold, 30 died and 25% of all Quebec residents left home to seek heated shelter. In addition, economic costs included $3 billion in lost business, $1 billion in home damage and $1 billion in government expenditures.
Improve Quality of Life
- Foundation for Economic Growth – Societies with a highly developed supply chain infrastructure (modern interstate highway system, vast railroad network, numerous modern ports and airports) are able to exchange many goods between businesses and consumers quickly and at low cost. As a result, the economy grows. In fact, the one thing that most poor nations have in common is no or a very poorly developed supply chain infrastructure.
- Improves Standard of Living – Societies with a highly developed supply chain infrastructure (modern interstate highway system, vast railroad network, numerous modern ports and airports) are able to exchange many goods between businesses and consumers quickly and at low cost. As a result, consumers can afford to buy more products with their income thereby raising the standard of living in the society. For instance, it is estimated that supply chain costs make up 20% of a product’s cost in the U.S. but 40% of a product’s cost in China. If transport damage is added in, these costs make up 60% of a product’s cost in China. The high Chinese supply chain cost is a major impediment to improving the standard of living for Chinese citizens. Consequently, China has embarked on a massive effort to develop its infrastructure.
- Job Creation – Supply chain professionals design and operate all of the supply chains in a society and manage transportation, warehousing, inventory management, packaging and logistics information. As a result, there are many jobs in the supply chain field. For example, in the U.S., logistics activities represent 9.9% of all dollars spent on goods and services in 2006. This translates into 10,000,000 U.S. logistics jobs.
- Opportunity to Decrease Pollution – Supply chain activities require packaging and product transportation. As a by-product of these activities, some unwanted environmental pollutants such as cardboard waste and carbon dioxide fuel emissions are generated. For example, paper and paperboard accounted for 34% of U.S. landfill waste in 2005. Only 50% of the 84 million tons of paper and paperboard waste were recycled. Also, carbon dioxide emissions from transportation accounted for 33% of total U.S. CO2 emissions in 2005. As designers of the network, supply chain professionals are in a key position to develop more sustainable processes and methods.
- Opportunity to Decrease Energy Use – Supply chain activities involve both human and product transportation. As a by-product of these activities, scarce energy is depleted. For example, currently transportation accounts for 30% of world energy use and 95% of global oil consumption. As designers of the network, supply chain professionals have the role of developing energy-efficient supply chains that use fewer resources.
Protect
Cultural Freedom and Development
- Defending Human Freedom – Citizens of a country depend on military logistics to defend their way of life from those who seek to end it. Military logisticians strategically locate aircraft, ships, tanks, missiles and other weapons in positions that provide maximum security to soldiers and other citizens. Also, superior logistics performance yields military victory. For example, the B-2 Stealth Bomber is able to deliver bombs to target without being detected by enemy radar.
- Protects Delivery of Necessities – Citizens of a country depend on supply chain managers to design and operate food, medicine and water supply chains that protect products from tampering. Sophisticated packaging techniques, state of the art surveillance cameras, global positioning systems and RFID inventory tracking are some of the methods used to deter terrorists from accessing these vital logistics systems.
·
Supply chain management, as explained by
Michigan State University professors Donald Bowersox, David Closs and M. Bixby
Cooper in Supply Chain Logistics Management, involves collaboration
between firms to connect suppliers, customers and other partners as a means of
boosting efficiency and producing value for the end consumer. The book
considers supply chain management activities as strategic decisions, and set up
“the operational framework within which logistics is performed.”
·
·
It is the efforts of a number of organizations
working together as a supply chain that help manage the flow of raw materials
and ensure the finished goods provide value. Supply chain managers
work across multiple functions and companies to ensure that a finished product
not only gets to the end consumer, but meets all requirements as well.
Logistics is just one small part of the larger, all-encompassing supply chain
network.
What is Logistics?
The Council of Supply Chain Management
Professionals defines logistics as “part of the supply chain process that
plans, implements and controls the efficient, effective forward and reverse
flow and storage of goods, services and related information between the point
of origin and the point of consumption in order to meet customer’s
requirements.”
Bowersox, Closs and Cooper define logistics as
activities – transportation, warehousing, packaging and more – that move and
position inventory and acknowledge its role in terms of synchronizing the
supply chain.
The objective behind logistics is to make sure
the customer receives the desired product at the right time and place with the
right quality and price. This process can be divided into two subcategories:
inbound logistics and outbound logistics.
Inbound logistics covers the activities concerned
with obtaining materials and then handling, storing and transporting them.
Outbound logistics covers the activities concerned with collection, maintenance
and distribution to the customer. Other activities, such as packing and
fulfilling orders, warehousing, managing stock and maintaining the equilibrium
between supply and demand also factor into logistics.
Key Differences: SCM vs. Logistics
It is important to remember that while the terms
should not be used interchangeably, they do supplement each other. One process
cannot exist without the other. Here are some key differences between the two
terms that will help you keep from blurring the lines between them.
- Supply chain management is a way to link major business processes within and across companies into a high-performance business model that drives competitive advantage.
- Logistics refers to the movement, storage and flow of goods, services and information inside and outside the organization.
- The main focus of supply chain is competitive advantage, while the main focus of logistics is meeting customer requirements.
- Logistics is a term that has been around for a long time, emerging from its military roots, while supply chain management is a relatively new term.
- Logistics is an activity within the supply chain.
In commerce,
supply-chain management (SCM), the management of the flow of goods
and services,[2]
involves the movement and storage of raw materials,
of work-in-process inventory, and of finished
goods from point of origin to point of consumption. Interconnected or
interlinked networks, channels and node businesses
combine in the provision of products and services required by end customers in a supply chain.[3]
Supply-chain management has been defined [4]
as the "design, planning, execution, control, and monitoring of
supply-chain activities with the objective of creating net value, building a
competitive infrastructure, leveraging worldwide logistics, synchronizing
supply with demand and measuring performance globally."[5]
SCM practice draws heavily from the areas of industrial engineering, systems engineering, operations management, logistics,
procurement,
information technology, and marketing [6]
and strives for an integrated approach.[citation
needed] Marketing channels play an important role
in supply-chain management.[6]
Current research in supply-chain management is concerned with topics related to
sustainability
and risk management,[7]
among others. Some suggest that the “people dimension” of SCM, ethical issues,
internal integration, transparency/visibility, and human capital/talent
management are topics that have, so far, been underrepresented on the research
agenda.
