What is supply chain management?
Definition of Supply Chain Management [Fred A. Kuglin, 1998]:
The manufacturer and its suppliers, vendors, and customers that is, all links in the extended enterprise working together to provide a common product and service to the marketplace that the customer is willing to pay for. This multi company group, functioning as one extended enterprise, makes optimum use of shared resources (people, processes, technology, and performance measurements) to achieve operating synergy. The result is a product and service that are high quality, low-cost, and delivered quickly to the marketplace.
Definition of Supply Chain Management [William C. Copacino, 1989]:
Logistics and Supply Chain Management refer to the art of managing the flow of materials and products from source to user. The logistics system includes the total flow of materials, from the acquisition of raw materials to delivery of finished products to the ultimate user.
Thus, extended Supply Chain (SC) includes suppliers, manufacturers, carriers, distributors, retailers and customers and shall be viewed as an integrated economic and operating system.
Any SC is a complex system comprised of different companies with different objectives and operating in an enormously complex world market economy under numerous uncertainties. Can such a SC be optimized for the best performance possible given the complexity of the problem?
An honest answer is NO. There is no "green button" ultimate solution to such a problem. The technology for creating adequate and complete models simulating the operation of complex systems like SC has not arrived yet.
However, much can be done on the way to attaining the optimal performance. Industry reports impressive results of optimizing SC management for better performance and some customers show dramatic gains from using SC planning technology:
- Capacity utilization increased by 25%
- Production cost reduced by 20%
- Inventory reduced by 70%
- Order-to-delivery time reduced by 50%
- On-time order shipment increased to near 100%
