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Supply Chain ManagementSupply Chain Management
Gerard J. Burke,University of Florida
Asoo J. Vakharia,University of FloridaIntroduction 365
Strategic and Tactical Issues in SCM 366
Product Strategies 366
Network Design 366
Sourcing Strategies 367
Transportation and Logistics 368
Operations and Manufacturing 368
Distribution Channels 369
Supply Chain Coordination 369
Incentive Impediments 370
Fostering Trust between Partners 370Incentives from Terms of Sale 370
Information Technology and SCM 371
Enabling Collaboration 371
Auctions and Exchanges 371
Electronic End Demand Fulfillment 371
Disintermediation 372
Summary 372
Glossary 372
Cross References 372
References 372INTRODUCTION
Supply chain management (SCM) is the art and sci-
ence of creating and accentuating synergistic relation-
ships among the trading members that constitute supply
and distribution channels. Supply chain managers strive
to deliver desired goods or services to the “right person,”
in the “right quantity,” at the “right time,” in the most ef-
fective and efficient manner. Usually this is achieved by
negotiating or achieving a balance between conflicting
objectives of customer satisfaction and cost-efficiencies.
Each link in each supply chain represents an intersec-
tion where supply meets demand, and directing the prod-
uct and information flows at these crossroads is at the
core of SCM. The integral value proposition of SCM is
as follows: Total performance of the entire chain is en-
hanced when all links in the chain are simultaneously op-
timized compared with the resulting total performance
when each individual link is optimized separately. Obvi-
ously, coordination of the individual links in the chain
is essential to achieve this objective. The Internet, and
information technology in general, facilitate the integra-
tion of multitudes of channel enterprises into a seamless
“inter”prise, leading to substitution of vertical integration
with “virtual integration.” Overcoming coordination road-
blocks and creating incentives for collaboration among
disparate channel members are some of the major cur-
rent challenges in SCM.
How well the supply chain performs as a whole hinges
on achieving fit between the nature of the products it sup-
plies, the competitive strategies of the interacting firms,
and the overall supply chain strategy. Planning also plays
a key role in the success of supply chains. Decisions re-
garding facility location, manufacturing schedules, trans-
portation routes and modes, and inventory levels and
location are the basics that drive supply chains. These
dimensions of tactical effectiveness are the sprockets
that guide the chain downstream through its channel to
end demand. Accurate and timely integrated information
lubricate the chain for smooth operation. Informationtechnologies allow supply chains to achieve better perfor-
mance by providing visibility of the entire supply chain’s
status to its members, regardless of their position in the
chain. The success of the collaborative forecasting, plan-
ning, and replenishment (CPFR) initiative illustrate the
value of the internet to SCM (CPFR Committee, n.d.).
A few of the most popular information tools or vehicles
available to supply chains are enterprise resource plan-
ning (ERP) software and related planning applications,
application service providers (ASP), online markets and
auction mechanisms (business-to-business [B2B] com-
merce), and electronic customer relationship manage-
ment (eCRM and business to consumer [B2C]).
A supply chain can be visualized as a network of firms
servicing and being serviced by several other businesses,
although it is conceptually easier to imagine a chain as
a river, originating from a source, moving downstream,
and terminating at a sink. The supply chain extends up-
stream to the sourcing of raw materials (backward inte-
gration) and downstream to the afterlife activities of the
product, such as disposal, recycling, and remanufacturing
(forward integration). Regardless of magnitude, all sup-
ply chains can be visualized as consisting of a sourcing
stage, a manufacturing stage, and a distribution stage.
The supply chain operations reference model devel-
oped by the Supply Chain Council (n.d.) assumes that all
processes at each of these stages are integral in all busi-
nesses. Each stage plays both a primary (usually physical
transformation or service creation) and a dual (market
mediator) role. This primary role depends on the strat-
egy of the supply chain, which in turn, is a function of
the serviced products’ demand pattern (Fisher, 1997). The
most strategic link is typically in the manufacturing or
service creation stage, because it is positioned between
suppliers and consumers. Depending on the structure of
the chain (in terms of products and processes employed),
power can shift from the supplier (e.g., monopolist sup-
plier of key commodities such as oil), to the manufactur-
ing (e.g., dominant producer of a unique product such as
semiconductors), to the distribution (e.g., key distributor365