Battle of the Supply Chains: The Economic Performance and Commercial Success of a Corporation Hinges on How Well It Designs, Organises and Manages Its Supply Chain

By Skjott-Larsen, Tage | European Business Forum, Spring 2006 | Go to article overview

Battle of the Supply Chains: The Economic Performance and Commercial Success of a Corporation Hinges on How Well It Designs, Organises and Manages Its Supply Chain


Skjott-Larsen, Tage, European Business Forum


The performance of an individual corporation rests on the strengths and weaknesses of the partners in its supply chain. Every company is linked to a series of other organisations: suppliers, customers, third-party logistics providers and intermediaries. As Charles Fine points out in his seminal book Clockspeed: "A company is its chain of continually evolving capabilities - that is, its own capabilities plus the capabilities of everyone it does business with." Individual corporations no longer compete against each other; they compete against other supply chains.

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Supply chain management (SCM) has developed as a management concept during the past two decades. Many international companies have implemented SCM, with notable examples including Bang & Olufsen, Cisco, Dell, Nike, Nokia, Novozymes, Procter & Gamble, Volvo, Wal-Mart and Zara. It has also been adopted by service companies, including telecoms firms, banks and the public sector. Although the most well-known examples are large, multinational companies, there are also many examples of SCM being implemented in small and medium-sized enterprises (Arend and Wisner, 2005).

Today's firms compete in an environment characterised by:

* Turbulent and dynamic markets, where the customers' requirements change rapidly and unexpectedly.

* Strongly segmented markets, where customers have varying requirements for products and services.

* Increasing market pressure for new innovations and customisation of both products and services.

* Growing customer demand for "experiences", not merely physical products.

* Global sourcing and global marketplaces.

These are the challenges that have made SCM an important management tool and competitive strategy for many corporations. Successful SCM requires integration on two levels: information integration to ensure that information continually flows throughout the supply chain; and organisational integration, which brings all the partners in the supply chain together to create a common goal. These principles, however, will be applied in different ways in different supply chains. Each supply chain is unique, and there is no "one size fits all" solution.

What is supply chain management?

When new management technologies are launched, there is always a great deal of confusion about definitions, content and areas of application. SCM is no exception. Here are two sample definitions:

* Handfield and Nichols (2002) define SCM as: "The integration and management of supply chain organisations and activities through co-operative organisational relationships, effective business processes, and high levels of information sharing to create high-performing value systems that provide member organisations with a sustainable competitive advantage."

* Christopher (2005) defines SCM as: "The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole." This particular definition of SCM focuses on the management of relationships as a means of achieving better results for all members of the supply chain, including customers.

Christopher also claims that the term "supply chain management" is actually misleading. "Demand chain management", he says, would be a better term, as it stresses the fact that the chain is driven by market forces and not by the supply side. Christopher further suggests that the word "chain" be replaced by "network" because the supply chain is normally comprised of a complex network of players on both the vendor and the customer sides.

Information integration

Information integration enables managers to examine the operations of the organisation as a whole and not in a fragmented, functionally isolated manner. Information technology links together all the participants in a supply chain, thereby facilitating activities such as inventory management, order fulfilment, production planning, and delivery planning and co-ordination. …

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