Fundamentals of Supply Chain Management

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Managing a group of connected organizations (companies) that add value to products or services for the end consumer.

A network of independent organizations working together to bring a product or service to the end consumer.

The process of managing all activities within a supply chain.

Any company involved and participating in bringing a product or service to the consumer.

The companies involved in a supply chain aren’t usually part of the same organization.

Early focus was on purchasing activities and cost reduction within the supply chain.

A major development in supply chain management with increased publications.

A supply chain is best visualized as a network, not a simple chain, highlighting interconnected companies working towards value addition.

The supplier's supplier in the supply chain material flow.

The customer of the focal company in a supply chain.

Original Equipment Manufacturer/ Original Brand Manufacturer - the company at the center of the supply chain.

The movement of goods and services from suppliers' suppliers to the end consumer.

The money flow within the supply chain, originating from the final consumer.

The movement of raw materials through the supply chain, transforming into finished products for the end consumer.

Data exchanged between supply chain participants, like demand, forecasts, production schedules, and design updates.

A supply chain viewed from the perspective of continuous demand, stretching back to upstream suppliers.

A supply chain viewed as a series of interconnected activities that add value to the product or service.

As materials move through the supply chain, ownership changes hands from supplier to buyer.

Departments working independently in an organization, without clear collaboration or communication.

Focusing on interconnected activities and workflows within the supply chain, rather than isolated departments.

The constant change and improvement occurring in the field of supply chain management.

One team or department handles all purchasing needs for an organization.

Buying raw materials, components, and labor directly for production.

Benefits include cost savings, stronger supplier relationships, improved cash flow, lower inventory, streamlined processes, and increased purchasing power.

Drawbacks include lack of centralized control, inefficiencies, disorganized data, lost bulk purchasing opportunities, and higher overall costs.

Benefits include lower costs, faster delivery, reduced risks, improved efficiency, better supplier management, and opportunities for innovation.

Drawbacks include supplier risk, uncertainty about purchase value, order risk, and potential challenges to profit margins.

First In, First Out - older inventory is used before newer stock.

Last In, First Out - newest inventory is used before older stock.

In the early days, supply chain management was seen as a way to reduce costs through operational improvements like purchasing and logistics optimization. However, it has evolved into a strategic focus that considers the entire supply chain.

Supply chains have expanded from local to regional and now often encompass global networks. Cost reductions and market access drive this trend.

Modern supply chain management views the entire network of organizations as a single entity. This extends beyond the traditional boundaries of a single company.

Supply chain management shifts the focus from managing individual companies to managing the flow of value across an extended network of businesses.

Relationships between businesses in the supply chain have moved away from purely transactional interactions (cost-driven) to embrace a more collaborative and value-driven approach.

Purchasing is the process of acquiring goods or services. Procurement is a broader term that includes all the activities involved in acquiring resources, from selecting suppliers to managing contracts.

When choosing suppliers, businesses need to evaluate factors beyond price. Quality, service, and selection are equally important.

One of the key aspects of purchasing is determining the volume of goods or services needed. This involves planning for future demand and negotiating with suppliers.

Purchasing goods and services needed for daily business operations, such as computers, software, and travel.

A one-time request for a specific shipment of goods and services.

A legally binding contract between a buyer and seller outlining the terms of a purchase for goods or services.

Legal record, protection against price increases, avoids duplicate orders, helps with tracking, improves accuracy, reduces human errors, and saves time.