1.3 Supply Chain Management
As we discussed in the previous section, supply chains are a natural occurrence in any business operation. However, while supply chains are a given, supply chain management is a conscious and strategic choice. It’s a decision made by companies to improve efficiency, reduce costs, and gain a competitive advantage. We will understand this better through real-world examples.
Consider the case of Chase Bank and Frosch, a travel company. In the normal course of business, Chase purchased travel services for its customers from Frosch, a typical supply chain operation. However, Chase recognized that travel was a significant category of consumer spend. To better serve its customers and gain a competitive advantage, Chase made a strategic decision to acquire Frosch. This move is an example of proactive supply chain management, where Chase chose not to let the supply chain operate as it was, but to actively manage it to create more value.
Similarly, Boeing faced a critical shortage of airplane seats, a key component of its aircraft. Instead of relying on its existing supply chain, Boeing chose to form a strategic partnership with Adient, a leading provider of automotive seats. This collaboration allowed Boeing to ensure a steady supply of airplane seats without the need to invest in a new manufacturing facility or expertise. This is another example of active supply chain management, where Boeing chose to manage its supply chain strategically to overcome a critical challenge.
In the logistics sector, FedEx, a global courier delivery services company, has leveraged technology to optimize its supply chain. FedEx Dataworks, an organization within FedEx, uses data science and machine learning to make shipping more efficient. By enriching shipment data with weather and traffic data, FedEx has been able to improve the flow of goods through its network and enhance its reliability as a carrier. This is an example of how FedEx is actively managing its supply chain by using technology to gain a competitive advantage.
As we can see from these examples, supply chain management encompasses a variety of strategies to achieve organizational objectives. Chase used a make-or-buy analysis to reconfigure its supply chain network, Boeing reformulated supplier relationships, and FedEx leveraged technology. Supply chain management is about integrating these diverse approaches and skills. It’s about bringing together different disciplines, from engineering and accounting to information technology, and harmonizing them to create a well-oiled supply chain machine.
This integration of diverse disciplines and strategies is what makes supply chain management a dynamic and exciting field. It offers endless opportunities for innovation and improvement. Whether it’s finding new ways to collaborate with suppliers, leveraging technology to optimize logistics, or rethinking the entire supply chain network, there’s always something to learn and explore. This dynamism, coupled with the significant impact that effective supply chain management can have on an organization’s success, makes it a compelling choice for study and a rewarding career.
As students, it’s important to know that there are several organizations dedicated to the advancement of the supply chain management profession. One such organization is the Association for Supply Chain Management (ASCM), which defines supply chain management as “the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.” Another is the Council of Supply Chain Management Professionals (CSCMP), which defines it as “the integrated planning and execution of processes required to optimize the flow of materials, information, and financial capital in the areas that broadly include demand planning, sourcing, production, inventory management, and storage, transportation, and return for excess or defective products.” The Institute for Supply Management (ISM) is another such organization that provides resources and standards for supply chain management.
In the following sections, we will extend this definition and delve deeper into the functional view of supply chain management and explore the various functions involved in managing a supply chain, from purchasing and planning to operations and distribution.
– Pause and Think –
- How did Boeing manage its supply chain to overcome the shortage of airplane seats?
