- A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.
- Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer.
- In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable.
The Council of Supply Chain Management Professionals defines supply chain management as follows:
Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, and finance, and information technology.
A typical supply chain begins with the ecological, biological, and political regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of an ever-decreasing size and increasingly remote geographical locations, and finally reaching the consumer.
Many of the exchanges encountered in the supply chain are therefore between different companies that seek to maximize their revenue within their sphere of interest, but may have little or no knowledge or interest in the remaining players in the supply chain.
More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise. Guaranteeing acceptable conditions in a global supply chain can be a complex challenge.
As part of their efforts to demonstrate ethical practices, many large companies and global brands are integrating codes of conduct and guidelines into their corporate cultures and management systems. Through these, corporations are making demands on their suppliers (facilities, farms, subcontracted services such as cleaning, canteen, security etc.) and verifying, through social audits, that they are complying with the required standard.
Supply chain modeling
There are a variety of supply-chain models, which address both the upstream and downstream elements of supply chain management (SCM).
- The SCOR (Supply-Chain Operations Reference) model, developed by a consortium of industry and the non-profit Supply Chain Council (now part of APICS) became the cross-industry de factor standard defining the scope of supply-chain management. SCOR measures total supply-chain performance. It is a process reference model for supply-chain management, spanning from the supplier’s, supplier to the customer’s customer. It includes delivery and order fulfilment performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supply chain.
- The Global Supply Chain Forum has introduced another supply chain model. This framework is built on eight key business processes that are both cross-functional and cross-firm in nature. Each process is managed by a cross-functional team including representatives from logistics, production, purchasing, finance, marketing, and research and development. While each process interfaces with key customers and suppliers, the processes of customer relationship management and supplier relationship management form the critical linkages in the supply chain.
- The Risk-Averse Optimal Position of the Delivery Window (RA-OPDW) is another supply chain model. It was the first model to report that “the optimal position of the supply chain delivery window, which is necessary to achieve supply chain resilience, is neither determined by penalty cost per time unit late nor by the penalty cost per time unit early but by their ratio.”
- The American Productivity and Quality Centre (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member organizations as an open standard to facilitate improvement through process management and benchmarking, regardless of industry, size, or geography. The PCF organizes operating and management processes into 12 enterprise-level categories, including process groups, and over 1,000 processes and associated activities.
- In the developing country public health setting, John Snow, Inc. has developed the JSI Framework for Integrated Supply Chain Management in Public Health, which draws from commercial sector best practices to solve problems in public health supply chains.