Supply chain management
This text will be the introduction to the module supply-chain management.
What is supply chain management? Organizations, people, business processes, technology, and information required to produce products or services efficiently. Supply chains are often global, since suppliers and customers may be located across borders.
A supply chain may be very complex with many organizations involved. Still for one single organization, the total supply chain is hidden, since the organization is interacting only with its own suppliers and its own customers.
Making a car
What are the components of the car?
Who makes the components?
What are the components made of?
At the start of the supply chain: Raw materials.
In every step, a refinements takes place.
A supply chain depends on exchange of different kinds of documents: Orders, confirmations, invoices etc. When the supply chain is global, even more documents are required. This may be documents related to customs, but also origin of supplies or declarations of what the product contains.
Agreements (SLA´s) define expectations and obligations between the partners.
So a supply chain is about everything that is needed to produce the product or service, including all the information that must be exchanged between the different parts of the supply chain.
Computers have had large impact on supply chain management. THe first use of computers were computerized order entry systems. Such systems made it possible for a manufacturer to order parts from its suppliers.
1970´s: Electronic Data Interchange – document interchange through computer networks (Norwegian Customs stared using EDI for transport documents)
Later, document interchange through Internet has become more popular. Formats for different documents have been standardized. XML is often the underlying platform for such standards. One well-known standard within supply chain management is ebXML (electronic business XML).
Enterprise Resource Planning (ERP) systems keeps track of all resources used in the production process and forecasts when new supplies are needed. A modern ERP system can communicate with the suppliers and automatically order new supplies when supplies are running low. The ERP system can help optimize the supply chain.
Digital storefronts (shopping for businesses)
Private industrial networks (typically vertical market)
Net marketplaces (request for tenders etc.)
Supply chain management brings many benefits:
Lower administrative costs
Lower search costs for buyers
Reduced inventory costs
Lower transaction costs
Increased production flexibility by ensuring just-in-time parts delivery
Improved quality of products by increasing cooperation among buyers and sellers
Decreased product cycle time
Increased opportunities for collaboration
Greater price transparency
Increased visibility, real-time information sharing
However, some risk is posed by increased globalization and consolidation