Basic Concepts of Supply Chain Management

 After reading this chapter you will be able to

• Appreciate what a supply chain is and what it does
• Define the different organizations that participate in any
supply chain
• Discuss ways to align your supply chain with your business
strategy
• Start an intelligent conversation about the supply chain
management issues in your company
Supply chains encompass the companies and the business activities
needed to design, make, deliver, and use a product or service.
Businesses depend on their supply chains to provide them with
what they need to survive and thrive. Every business fits into one or
more supply chains and has a role to play in each of them.
The pace of change and the uncertainty about how markets will
evolve has made it increasingly important for companies to be aware of
the supply chains they participate in and to understand the roles that
they play. Those companies that learn how to build and participate in
strong supply chains will have a substantial competitive advantage in
their markets.
CHAPTER 1
Basic Concepts of
Supply Chain Management
Nothing Entirely New. . . Just a Significant Evolution
The practice of supply chain management is guided by some basic
underlying concepts that have not changed much over the centuries.
Several hundred years ago, Napoleon made the remark, “An army
marches on its stomach.” Napoleon was a master strategist and a skillful
general and this remark shows that he clearly understood the importance
of what we would now call an efficient supply chain. Unless the
soldiers are fed, the army cannot move.
Along these same lines, there is another saying that goes,“Amateurs
talk strategy and professionals talk logistics.” People can discuss all sorts
of grand strategies and dashing maneuvers but none of that will be possible
without first figuring out how to meet the day-to-day demands of
providing an army with fuel, spare parts, food, shelter, and ammunition.
It is the seemingly mundane activities of the quartermaster and the supply
sergeants that often determine an army’s success. This has many analogies
in business.
The term “supply chain management” arose in the late 1980s and
came into widespread use in the 1990s. Prior to that time, businesses used
terms such as “logistics” and “operations management” instead. Some
definitions of a supply chain are offered below:
• “A supply chain is the alignment of firms that bring products
or services to market.”—from Lambert, Stock, and Ellram
in their book Fundamentals of Logistics Management (Lambert,
Douglas M., James R. Stock, and Lisa M. Ellram, 1998,
Fundamentals of Logistics Management, Boston, MA:
Irwin/McGraw-Hill, Chapter 14)
• “A supply chain consists of all stages involved, directly or
indirectly, in fulfilling a customer request. The supply chain
not only includes the manufacturer and suppliers, but also
transporters, warehouses, retailers, and customers themselves.”—
from Chopra and Meindl in their book Supply

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