Supply Chain Definitions

The Council of Logistics Management has adopted this definition of logistics:

Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers' requirements.

Pronunciation: lo-'jis-tiks
Function: noun plural but singular or plural in construction
Etymology: French logistique art of calculating, logistics, from Greek logistikE art of calculating, from feminine of logistikos of calculation, from logizein to calculate, from logos reason

Date: circa 1861
1 : the aspect of military science dealing with the procurement, maintenance, and transportation of military matériel, facilities, and personnel

2 : the management of the details of an operation

3 : all activities involved in the management of product movement, that is, delivering the right product to the right place at the right time for the right price.

Supply Chain Management

A supply chain is the process of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. All organizations have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured. These networks obtain supplies and components, change these materials into finished products and then distribute them to the customer.
Managing the chain of events in this process is what is known as supply chain management. Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down.
The first step is obtaining a customer order, followed by production, storage and distribution of products and supplies to the customer site. Customer satisfaction is paramount. Included in this supply chain process are customer orders, order processing, inventory, scheduling, transportation, storage, and customer service. A necessity in coordinating all these activities is the information service network.
In addition, key to the success of a supply chain is the speed in which these activities can be accomplished and the realization that customer needs and customer satisfaction are the very reasons for the network. Reduced inventories, lower operating costs, product availability and customer satisfaction are all benefits which grow out of effective supply chain management.

The decisions associated with supply chain management cover both the long-term and short-term. Strategic decisions deal with corporate policies, and look at overall design and supply chain structure. Operational decisions are those dealing with every day activities and problems of an organization.
These decisions must take into account the strategic decisions already in place. Therefore, an organization must structure the supply chain through long-term analysis and at the same time focus on the day-to-day activities.
Furthermore, market demands, customer service, transport considerations, and pricing constraints all must be understood in order to structure the supply chain effectively. These are all factors, which change constantly and sometimes unexpectedly, and an organization must realize this fact and be prepared to structure the supply chain accordingly.

Structuring the supply chain requires an understanding of the demand patterns, service level requirements, distance considerations, cost elements and other related factors. It is easy to see that these factors are highly variable in nature and this variability needs to be considered during the supply chain analysis process. Moreover, the interplay of these complex considerations could have a significant bearing on the outcome of the supply chain analysis process.

There are six key elements to a supply chain:
· Production
· Supply
· Inventory
· Location
· Transportation
, and
· Information

The following describes each of the elements:

1. Production

Strategic decisions regarding production focus on what customers want and the market demands. This first stage in developing supply chain agility takes into consideration what and how many products to produce, and what, if any, parts or components should be produced at which plants or outsourced to capable suppliers. These strategic decisions regarding production must also focus on capacity, quality and volume of goods, keeping in mind that customer demand and satisfaction must be met. Operational decisions, on the other hand, focus on scheduling workloads, maintenance of equipment and meeting immediate client/market demands. Quality control and workload balancing are issues which need to be considered when making these decisions.

2. Supply

Next, an organization must determine what their facility or facilities are able to produce, both economically and efficiently, while keeping the quality high. But most companies cannot provide excellent performance with the manufacture of all components. Outsourcing is an excellent alternative to be considered for those products and components that cannot be produced effectively by an organization's facilities. Companies must carefully select suppliers for raw materials. When choosing a supplier, focus should be on developing velocity, quality and flexibility while at the same time reducing costs or maintaining low cost levels. In short, strategic decisions should be made to determine the core capabilities of a facility and outsourcing partnerships should grow from these decisions.

3. Inventory

Further strategic decisions focus on inventory and how much product should be in-house. A delicate balance exists between too much inventory, which can cost anywhere between 20 and 40 percent of their value, and not enough inventory to meet market demands. This is a critical issue in effective supply chain management. Operational inventory decisions revolved around optimal levels of stock at each location to ensure customer satisfaction as the market demands fluctuate. Control policies must be looked at to determine correct levels of supplies at order and reorder points. These levels are critical to the day to day operation of organizations and to keep customer satisfaction levels high.

4. Location

Location decisions depend on market demands and determination of customer satisfaction. Strategic decisions must focus on the placement of production plants, distribution and stocking facilities, and placing them in prime locations to the market served. Once customer markets are determined, long-term commitment must be made to locate production and stocking facilities as close to the consumer as is practical. In industries where components are lightweight and market driven, facilities should be located close to the end-user. In heavier industries, careful consideration must be made to determine where plants should be located so as to be close to the raw material source. Decisions concerning location should also take into consideration tax and tariff issues, especially in inter-state and worldwide distribution.

5. Transportation

Strategic transportation decisions are closely related to inventory decisions as well as meeting customer demands. Using air transport obviously gets the product out quicker and to the customer expediently, but the costs are high as opposed to shipping by boat or rail. Yet using sea or rail often times means having higher levels of inventory in-house to meet quick demands by the customer. It is wise to keep in mind that since 30% of the cost of a product is encompassed by transportation, using the correct transport mode is a critical strategic decision. Above all, customer service levels must be met, and this often times determines the mode of transport used. Often times this may be an operational decision, but strategically, an organization must have transport modes in place to ensure a smooth distribution of goods.

6. Information

Effective supply chain management requires obtaining information from the point of end-use, and linking information resources throughout the chain for speed of exchange. Overwhelming paper flow and disparate computer systems are unacceptable in today's competitive world. Fostering innovation requires good organization of information. Linking computers through networks and the internet, and streamlining the information flow, consolidates knowledge and facilitates velocity of products. Account management software, product configurators, enterprise resource planning systems, and global communications are key components of effective supply chain management strategy.

The Issues

The supply chain has also been called the value chain and the service chain, depending on the "fad of the moment", or sometimes, we think, the weather, or sun spot activity. Just like anything else, supply chain management is no panacea, nor should it be embraced as a religion. It is an operational strategy that, if implemented properly, will provide a new dimension to competing: quickly introducing new customerized high quality products and delivering them with unprecedented lead times, swift decisions, and manufacturing products with high velocity. Software companies have jumped on the bandwagon and attempted to claim SCM as their own. Information transfer is critical to swiftly moving parts through the chain of processes, but information is only one of six key elements.

Pragmatic Applications

Fast delivery is critical in most markets today.
Many companies address this market demand by carrying higher inventories. Inventory is a hedge against lead time.
Higher levels of inventory are often maintained because a company is unable to produce the material within the time demanded by the market.
Analyzing the processes in the supply chain can identify the causes and facilitate solutions to reduce overall throughput time. Compressing time in the chain of events from the time a customer places an order until the order is satisfied can provide a competitive edge without the burden of carrying excessive inventory.

What is supply chain management?

A supply chain is a collection of inter-dependent steps that, when followed, accomplish a certain objective such as meeting customer requirements.
Supply-chain management is a generic term that encompasses the coordination of order generation, order taking, and offer fulfillment/distribution of products, services, or information. Numerous, independent firms and customers are involved in a supply chain (e.g., manufacturers and parts suppliers; parcel shippers, senders and receivers; wholesalers and retailers). The WWW and extranets (connected intranets) have shown a great potential in linking and managing these entities into a virtual organization. For over 20 years, EDI has promised such revolutionary gains but failed to extend its benefit to small and medium companies.
The remarkable nature of electronic commerce is its power in enabling all types and sizes of firms to interact.

Q. What are the benefits of using the Internet for supply chain management?

Interoperable intranets make it easy for supply-chain partners to share and exchange information, and at the same time, the whole management process may be contracted to a third party instead of developing one's own applications and investing in separate systems. In this intermediated market, sophisticated logistics management and automated supply-chain management are available almost universally.

Suffice it to say that if one had to differentiate between the two it would be to say that Supply Chain Management is looking at active management of the whole enchilada, while logistics can relate to part or parts with the supply chain.
Unless an individual wishes to assume it, to make logistics literally synonymous probably requires the use of additional words like "total logistics management" or "integrated logistics management" to definitively mean the same thing.

By Ken Kinlock at

Selecting SCM Systems

In a recent article Supply Chain Management as a Service (SCMaaS), a couple of interesting comments came up: (1) are there end-to-end applications available or just the sort of point solutions you've listed? Based on your broad definition of the supply chain, it would almost seem that a broad solution would be a cloud-based ERP; (2) are there vendors that focus on the planning side? The vendors you describe seem to be on the execution part of the process.

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Supply Chain Control Tower

Supply Chain Management Control Towers

Control towers are used in many industries for different purposes: airports and railroads use them for traffic control; power plants have control rooms to monitor operations; and third party logistics providers use them to track transportation activities. These are places where operations run well. Why not a


in order to monitor and assure your supply? Talk to us, we build them!

So just what is an SCM Control Tower? What are the functions of a Supply Chain Control Tower? Who staffs your Supply Chain Management Control Tower?

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Supply Chain Management Tools For Small Businesses

We see all kinds of supply chain tools available for medium to large businesses, but are small businesses being ignored? Without buying a huge ERP system that includes supply chain tools, what is available at realistic prices?

Let's take a look at QuickBooks because it is the closest thing to a “household word” for small business software as I can think of. For the first time ever, Intuit has added a Customer Relationship Management (CRM) feature to the latest version of its QuickBooks accounting software for SMBs. QuickBooks 2013 features Lead Centre, described by Intuit Canada as a “mini CRM tool” incorporated into the software's calendar. It helps users track sales leads, import existing leads and add associated tasks. When a lead does become an actual customer, their contact information can be moved into the Customer Center with just one click.

Virtual Manufacturers and Supply Chain Management

When it comes to supply chain management execution, we have all sorts of great tools (ERP, EDI, SCM). They are mostly designed for traditional manufacturers who own their factories. But we may be ignoring a new reality: the “virtual manufacturer”, one who outsources production. For them, the “tool of choice” is sometimes an Excel spreadsheet.

Managing to meet customer expectations is not like what ERP vendor's glossy brochure say. In reality, it is not only spreadsheets, but is phone, FAX, email and lots of sweat. Some of these folks who shepherd global supply chain operate with complex “jury rigged” routines.
affiliate_link The Forum for Supply Chain Integration

ec-bp was established in 2005 as the advocate for lowering the barriers to the adoption of EDI, and our email newsletter has been published every month since that time. Our focus has expanded beyond EDI to encompas the full gamut of supply chain practices and technologies. In addition, our readership has grown to become the largest of any similarly focused publication, and has expanded to include more than 90,000 professionals involved in nearly every aspect of the supply chain.

Today’s supply chain is more than simple transport of EDI documents. The complexity of maintaining compliance with trading partners, managing the ever increasing amount of data, and analyzing that data to drive constant improvement in processes and service take supply chain professionals far beyond the basics of mapping EDI documents.

Who Owns EDI

We have three choices:

The business function that receives the most benefit from it.

The IT function

A "neutral party" like finance

See the full article on Who owns EDI

See my other blogs

See other blogs about EDI

Differentiate Your Supply Chain Management Using Logistics

In reviewing the business elements of a company that interfaces with EDI, I am certain the most difficult to understand is the “Supply Chain”. The most common mistake is thinking that “Supply Chain Management” (SCM) is just another name for “Logistics”.

Logistics may be integrated into SCM, as SCM covers the start and end of the whole process. In some organizations logistics is separated from SCM and is more concentrated on the transportation and logistics side.

We have at least two scenarios:
Logistics included within SCM
SCM divided into Logistics and SCM

There are even more possibilities too. We will expand on this issue and show there are many alternatives, all depending on how YOUR BUSINESS needs to operate.
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If you use an EDI VAN for your business, this message is for you. Move past the ancient VAN technology. JWH EDI Services Electronic Commerce Messaging System will bring your EDI operation into the 21st Century. The power of our global EDI network is available on your server, your cloud platform or your application. AND you cannot beat our prices.
You can connect and communicate with all your customers and trading partners through the JWH EDI Services Electronic Commerce Messaging System - Connect with trading partners around the world on a single Network-as-a-Service platform, get real-time transaction visibility and eliminate those manual network processes. It is a pay as you need model. We track all interchanges from the moment they enter the system, along every step across the network, and through the delivery confirmation.

Supply Chain Management Role In Alternate Parts Sourcing

The role of Supply Chain Management is important: it is all about “ business continuity management”. SCM is the key to protecting the business operation from unplanned risks that can do things like shut down a whole assembly line. Key SCM players are Procurement and In-Bound Logistics.

Many of us have seen these “disasters” happen. My favorite was a chartered two-engine airplane with two pilots flying from Canada to Arkansas with nothing on board except a box of name plates that were critical to the end product.

The “buzz words” are Business Continuity (BC) and Disaster Recovery (DR). A BC/DR program is built around: impact analysis; risk assessment; strategy development; awareness and training; audit; and improvement.

The area that is the biggest trouble maker is parts. SCM needs to be able to anticipate and be able to replace a part at almost a moments notice. Lets take a look at what is involved in this process.

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C-SCM: Community Supply Chain Management

We need a software-as-a-service (SaaS) model which will enable community SCM (C-SCM) for both large and small companies that outsource manufacturing. We want communities of supply chain owners, customers and supply partners to use any public or private cloud environment. We want our community to take advantage of scalability, security and reliability of current cloud environments. Our goal is to centralize information and create real-time, cross-community visibility. Cloud is all about dynamic choice, ‘just-in-case’ computing power and scalability.

This year we have dealt with many topics leading up to Community SCM. First was “End of ERP”. We covered “Virtual Manufacturers”. Other topics that bear upon Community SCM are “Partnerships with Vendors, Suppliers, Customers” and “Social Supply Chains”. We have determined that to make a community supply chain work, one of the best tools is Software-as-a-Service (SaaS). We reviewed how Retail Universe (RU) can help companies collaborate with their other partners.

Supply Chain Management (SCM)

The importance of electronic commerce to your supply chain

Supply Chain Synchronization

Defining Supply Chain Management: a historical perspective and practical guidelines

Supply Chain Management as a Service (SCMaaS)

Supply Chain Management as a Service (SCMaaS) – Is it Real? What a great idea ! Can't somebody just do this for me ? Why do I have to reinvent the wheel ?

One of my projects is looking at supply chain software. I recently looked at software for distributors “Wholesale Distributors; Do They Use ERP or CRM?”. I am planning on doing the same for typical manufacturers and for virtual manufacturers, but I keep thinking that maybe outsourcing is a a good answer too.

Wouldn't it be easier to just purchase a service than having to design, build, debug and roll-out your own solution? Tools, skills, and processes need to be designed from the ground up to support a synchronized demand driven supply chain. Yes there are a lot of tools around, but what is deployed? I feel there are companies looking towards the future of SCM and the potential gains by providing a next generation type of service to their customers. Read more:
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