Understanding Supply Chain Management

Study Notes

Supply chain profitability, or supply chain surplus, is tied to the difference between customer revenue and overall supply chain costs.
A supply chain is a network of organizations, facilities, and activities involved in producing and delivering a product or service.
Key facilities in a supply chain include warehouses, factories, distribution centers, retail outlets, and offices.
Flows in a supply chain consist of information, products, and funds, all of which generate costs.
Functions in supply chain management encompass forecasting, purchasing, inventory management, quality assurance, scheduling, production, and customer service.
Effective supply chain management aims to maximize total profitability by coordinating these flows.
The primary goal of any supply chain is to meet customer needs while generating profit.

Supply chain management involves the strategic coordination of business functions to integrate supply and demand.
Most supply chains are dynamic networks or webs rather than linear structures.
Every organization participates in at least one supply chain, often multiple ones, which can be manufacturing or service-oriented.

The main objective is to maximize overall value generated from the supply chain.
Value is defined as the difference between the final product’s worth to the customer and the supply chain’s costs incurred in fulfilling customer requests.
Proximity to the final customer shortens demand components while extending supply components, emphasizing the need for efficiency.
Supply chains are critical for business viability and require effective planning, implementation, and control of operations.

Key challenges in managing supply chains include:
- Determining appropriate levels of outsourcing.
- Managing procurement and supplier relationships.
- Managing customer relationships effectively.
- Quickly identifying and responding to problems as they arise.

Supply chains can also be viewed as value chains, reflecting how value is added throughout the process.
There are three types of flows within supply chains:
- Product and service flow, which involves the movement of goods or services.