Supply chain management is a term that is used in order to describe the activities associated with logistics, control and planning of the materials and it is also used to describe the flow of the information internally as well as externally between the organizations (Hang and Chau, 2007). It is also used in order to explain the strategic and the organizational issues that are internal to an organization (Sabri, 2015).
It also indicates interconnection of the organizations that are associated with each other via downstream as well as upstream associations between the procedures and processes that help in the production of value for the final consumers in the shape of product and services (Handfield and McCormack, 2008). There are many researchers who have interpreted the concept of supply chain management. Harrison and Ganeshan have explained that Supply Chain Management is a network comprising of several facilities and options associated with distribution for performing the functions of procurement of the materials, conversion of the materials into the intermediate and then into the finished products, and ultimately distributing the final products to the customers.
Lee and Corey (1995) have defined that the Supply Chain Management comprises of the several combined activities that are involved in the procurement of the raw material, their transformation into the intermediate products, and then into the final goods, and delivery of the products to the customers via the distribution system. It is also considered that the Supply chain is a network of the companies that are involves in different activities and processed through the downward as well as upward linkages in order to produce value for the ultimate consumers in the form of the products and services (Christopher, 1998). Supply Chain Management is also defined as the systematic, planned, and strategic collaboration of the functions that are associated with the traditional business, and the tactic involved in the functions of the business within a specific organization, and across several businesses in a supply chain, for improving the long term functioning and performance of the companies at the individual level, and the performance of the whole supply chain (Mentzer et al., 2001). However, separation of the activities linked with the supply chain helps in ensuring economies of scale as well as specialization. A significant way of describing the supply chain is in terms of the global sourcing, logistics and distribution activities. Global sourcing is a process of recognizing, evaluating, collaborating, and configuring the supply across several geographies. In global sourcing several factors such as transportation cost, purchase price, carrying cost of inventory, duty costs and tariffs, operational risks, and supply performance are worth considering. The logistic and the distribution activities associates with the supply chain can be described in terms of the management of inventory, transportation, storage, handling of materials, warehousing, packaging, security, communication, processing of order, customer service, and reverse logistic actions or activities.
There are several problems that are necessary to be resolved in order to ensure successful operation of supply chain management, and the resolution of the issues and problems is the major objective of the supply chain management (Trkman., Stemberger., and Jaklic, 2006). In order to ensure effective operations management and solving the problems in today’s rapidly advancing and competitive business environment, and for attaining best value from the supply chain, many researchers are trying to find favorable solutions. Best value supply chains, however, utilize the strategic management of the supply chain in order to outshine in terms of the quality, flexibility, cost, and the speed. However, the term best value supply chain can be explained if several theoretical perspectives such as agency theory, game theory, social capital theory, resource dependence theory, resource based view, network theory, institutional theory, transaction cost economics, and strategic choice are considered (Ketchen et al., 2007).
According to Ketchen et al (2007), the agency theory points out that the use of the cultural competitiveness an d the reward structures helps in aligning the interest of members associated with supply chain in order to form best value supply chain. Game theory is of the view that best value supply chain can be created with the help of the trust and mutual dependence as they help in overcoming enticement of members for convenient behaviors. Social Capital theory explains that shared values, goals, and experiences paves the way to improved performance.Resource dependence theory describes that the members of the supply chain considers the fact that the dependence can help in creation of trust as well as tolerance. Resource-Based View or the Knowledge-Based View believes on the assumption that there are unique resources present in the supply chains, and supply chains can be competitive tools that are inimitable. Network Theory believes on the combination of weak and strong associations that are in consistent with the needs and requirements of the supply chain for maximizing the performance of supply chain. The institutional theory explains that for the best supply chain best practices and recipes prevailing in the industry are used for informing, but they do not dictate the activities associated with the supply chain management. Transaction Cost Economics emphasizes on the total cost and not on the transaction cost in order to make decision for best value supply chain.
With regard to the supply chain management there are two notable dimensions. First dimension indicates the level of analysis of the supply chain management. The level of analysis comprises of the dyadic level, chain level, and the network level. The dyadic level describes the sole two party associations between the manufacturer and the supplier or between the manufacturer and the retailer or distributor (Todeva, 2006). The chain level comprises of the dyadic relationships that include a supplier, a customer, a supplier of supplier, and customer of a customer (Diaz, 2006). The network level describes the network of operations such as immediate operations, total operations, downstream operations, and the upstream operations. In the supply chain, there are several elements of exchange such as assets, information, knowledge, and relationships. The assets comprises of the material asserts, financial, human and the technological assets. In the material assets, the stocks and inventory are included.
The management of the material assets considers the pressures associated with the delivery time and the cost for the management of the transportation methods and the stocks. These also describe the static as well as dynamic dimension of the supply chain management. The static dimension of the supply chain indicates the position of the inventories in the supply chain, amount of the stock at every point, addition of the regional warehouses, use of the warehouses for particular customers, points of consolidation, and de-consolidation. The dynamic supply chain indicates the form of shipment that is meant to be used, whether or not to consolidate the routes of transportation, the providers of the logistic service, and the use of the rapid modes of transportation such as the express delivery etc. there are some works that regard that the financial and the technological assets are also an essential component of the supply chain management. Considering an example that some organizations include accounts department as a most important part of supply chain, and they keep control and record of the cash situation for ensuring proper management of the supply chain, and for ensuring the success of the company. Human or the employees are also considered as an asset but for their proper management it is imperative to redesign the incentive system of the organization (Lee and Billington, 1992).
Another important element of the exchange, which is an important part of the supply chain management, is Information. The information is in the form of the flow of the information that allows rapid payments between the members of the supply chain between the organizations, and in the form of the stored, accumulated, and coded in the database of the organization. The information helps managers in developing necessary and the ideal systems in order to manage all the functions of the organization in an effectual manner. However, all the organizations are not available for sharing the information, which is due to the fact that they consider the disclosure of the information as a loss of power. However, this behavior helps in determining the misrepresentation and the distortion of the flow of information through the entire supply chain. The information is processes, interpreted, and moves up and down in the supply chain. The third essential element associated with the supply chain management is the knowledge. The time-based abilities represent the essential knowledge that is required for supply chain management (Handfield and Nicolas, 1999). The analysis of the connections between the capabilities of individuals, capability of the organization, and the capability of the network is another essential element that plays significant role in the knowledge for the management of supply chain. According the Cox (1995), the associations between the individual competence and the organizational performance and between the organizational competence and the network performance is a significant part of exchange in the supply chain management. The flow of information and the materials is not possible without an effectual supply chain foundation and the organizational relationships (Handfield and Nicholas, 1999). The organizational relationship should be considered at the macro as well as at the micro level. The relationship among the actors in the supply chain is influenced by several variables such as with the sourcing strategy, by the commitment and the attitude to the mutual improvement programs, the position of firm in the network, the degree of dependency on the network, the durability of the relationships, the technological links, the degree of influence and power, complexity and the length of chain, the distance in terms of the number of stages from the ultimate consumer should be low.
The vertical integration can be considered as an alternative to the supply chain management (Ellram, 1991). This is because it helps in managing the efficiency of the control channel via the ownership. The management of the quality in supply chain also holds significant importance. In the supply chain management, the perspective on quality management has emphasized on the interacting elements of systems such as, machines, processes, equipments, people, and plant as ways of making excellence in the services and the products. The competition does not exist only at the level of the firm, the business competition is now found in supply chains that are finding ways for getting advantage and competitive edge over the competing supply chains (Faweett, Ellram & Ogden, 2006). However, this competition level needs more collaboration among the networks of distributors, suppliers, customers, and the producers (Foster, 2008). The maintenance of the sustainability of supply chain is an issue in supply chain management. Guarantying sustainability in the supply chain management paves the way to conflict because of the complex tasks that are involved in the supply chain management. In order to ensure supply chain management it is essential to take the contrasting and conflicting nature of different tasks involved in supply chain into consideration. The base of the supply chain management also lies in the operations management, and for this reason the operations have to be improved in order to improve supply chain management.
For the optimization of the supply chain, the process of informing and the information technology plays a significant role (Wang, 2010). The information technology such as several internet applications helps in reduction of the cost, in effective use of the information, and in strategic planning of the process. For an effective management of the supply chain, it is essential that the information is promptly available to all the organizations in the supply chain, and the processes of the business should be organized and structured in such a manner that the information can be utilized fully. The most essential measure of the success of the supply chain management is the ultimate level of the service, the satisfaction of the customers, and the profitability and competitiveness of the supply chain. In this regard, the key performance indicators at the operational level should be considered. They include lead times, quality, and the total cost in the supply chain. Further, the cost and the responsiveness of the customers are also significant factors for measuring the performance and success of the supply chain.
The competencies of the supply chain are also very important because they exert positive influence on the organizational performance. The supply chain competencies indicate service, quality, distribution, operations, and the effectiveness of the design (Lysons, Farrington and Kenneth, 2006). The major objective of the supply chain competencies is to satisfy the needs, wants, and requirements of the customers. So, it is necessary for the managers to pay attention on the development of such competencies. The studies also indicate that the practice of management of supply chain may be structurally dependent or it may be situation dependent, so the management of the supply chain varies from one country to another. In the case of the supply chain management one size fits all does not hold adequate. The situation of every organization and every country may differ and it may need attention for effective management of the supply chain. Effective supply chain management helps an organization to become competitive in order to improve its performance (Ochonma, 2015).
The organizations should ensure the management of supply chain in accordance with their activities. They should devote their management resources to the active supply chain, and should avoid allocation of the resources in the supply chains that are not active. The organization should understand the supply chains deeply by breaking the systems into the sub-systems so that every step and every element become easy to understand. Further, the organizations should be familiar of the fact that the supply chains are dynamic, they are not static, so the managers should pay attention at all the levels and the changes that are required, and impact of changes on the operations of the supply chain. For the maintenance of the effectiveness of the supply chain, the organizations should ensure review on continuous basis and should consider the change in the management practice. The integration of the supply chain strategy with the organizational strategy is essential as it helps in maximizing the profitability. Further, Bullwhip effect may arise in the supply chain management, the bullwhip effect describes the small changes in the demand side of the chain that become huge for increasing the disturbances in the supply chain (Coyle et al., 2008).
The bullwhip effect can be controlled by the sharing of information, alignment of the control decisions and planning, improvement of the efficiency of flow, and improved forecasting for decreasing the lead time. The information should be improved in the entire supply chain, the alignment of the control decisions comprises of the sharing of information, system of control and planning in the whole chain. For improving the flow efficiency the time should be reduced, and better forecasting helps in reduction of the lead time, the reduction of lead time enables further forecasting that helps in the reduction of the inventory holding.
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