What Is Supply Chain

The best companies around the world are discovering a powerful new source of competitive advantage. It's called

supply-chain management and it encompasses all of those integrated activities that bring product to market and create

satisfied customers.

The Supply Chain Management Program integrates topics from manufacturing operations, purchasing, transportation, and

physical distribution into a unified program. Successful supply- chain management, then, coordinates and integrates all of these

activities into a seamless process. It embraces and links all of the partners in the chain. In addition to the departments within

the organization, these partners include vendors, carriers, third- party companies, and information systems providers.


Within the organization, the supply chain refers to a wide range of functional areas. These include Supply Chain Management-related activities such as inbound and outbound

transportation, warehousing, and inventory control. Sourcing, procurement, and supply management fall under the supply-chain umbrella, too. Forecasting, production planning and scheduling, order processing, and customer service all are part of the process as well.

Importantly, it also embodies the information systems so necessary to monitor all of these activities.

Simply stated, "the supply chain encompasses all of those activities associated with moving goods from the raw-materials stage through to the end user."

Advocates for this business process realized that significant productivity increases could only come from managing relationships, information, and material flow across enterprise

borders. One of the best definitions of supply-chain management offered to date comes from Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at Ohio State University. LaLonde defines supply-chain management as follows: "The

delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption. "As the "from sourcing to consumption" part of our last definition suggests, though, achieving

the real potential of supply-chain management requires integration--not only of these entities within the organization, but also of the external partners. The latter include the suppliers, distributors, carriers, customers, and even the ultimate consumers. All are

central players in what James E. Morehouse of A.T. Kearney calls the extended supply chain. "The goal of the extended enterprise is to do a better job of serving the ultimate

consumer,". Superior service, he continues, leads to increased market share. Increased share, in turn, brings with it competitive advantages such as lower warehousing and

transportation costs, reduced inventory levels, less waste, and lower transaction costs. The customer is the key to both quantifying and communicating the supply chain's value, confirms Shrawan Singh, vice president of integrated supply-chain management at Xerox.

"If you can start measuring customer satisfaction associated with what a supply chain can do for a customer and also link customer satisfaction in terms of profit or revenue growth," Singh explains, "then you can attach customer values to profit & loss and to the balance sheet."