1.1 what is supply chain management?
Fierce competition in todays global markets, la introduction of products with shorter y shorter life cycles, and the heightened expectations of customers have force bussines enterprises to invest in and focus attention on ther supply chains. This, together with continuing advances in comunications and transportation technologies(e.g., mobile communications the internet, and overnight delivery), has motivated the continuous evolution of the supply chain and of the tecniques to manage it.
In a typical supply chain, raw materials are procured, and items are produced at one or more factories, shipped to warehouses for intermediate storage, and the shipped to retailers or customers. Consequently, to reduce cost and improveservice levels, effective supply chain strategies must take into account the interactions at the various levels in the supply chain. The supply chain, which is also referred to as the logistics network, consists to suppliers, manufacturing centers, warehouses, distribution centers, and retail outlets, as well as raw materials, work-in-process inventory, and finished products that flow between thefacilities (fig.1-1)
In this book we present and explain concepts, insights, practical tools, and decision support systems important for the effective management of the supply chain. But what exactly is supply chain management? We define it as follows:
Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and stores so thatmerchandise is produced and distributed at the right time in order to minimize systemwide costs while satisfying service-level requirements.
This definition leads to several observations. First, supply chain management takes into consideration every facility that has an impact on cost and plays a role in making the product conform to customer requirements: from supplier and manufacturing facilitiesthrough warehouses and distribution centers to retailers and stores. Indeed, in some supply chain analysis, it is necessary to account for the suppliers suppliers and the customers customers because they have an impact on supply chain performance. Second, the objective of supply chain management is to be efficient and cost-effective across the entire system; total systemwide costs, from transportationand distribution to inventories of raw materials, work in process, and finished goods, are to be minimized. Thus the emphasis is not on simply minimizing transportation cost or reducing inventories but rather on taking a systems approach to supply chain management. Finally, because supply chain management revolves around efficient integration of suppliers, manufacturers, warehouses, and stores, itencompasses the firms activities at many levels, from the strategic level through the tactical to the operational level.
What about logistics management? what is the difference between supply chain management and logistics management? While the answer to this questions depends on who is addressing this issue, we will not distinguish between logistics and supply chain management in this text.Indeed, our definition of supply chain management is similar to the definition of logistics management given by the Council of logistics management:
The process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose ofconforming to customer requirements.
What makes supply chain management difficult? Although we will discuss a variety of reasons throughout this text, they can all be related to one or both of the following observations:
1. It is challenging to design and operate a supply chain so that total systemwide costs are minimized and systemwide service levels are maintained. Indeed, it is frequently...
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