Purpose of supply chain

Companies have started looking at obtaining quality products and materials at the lowest possible cost from various suppliers instead of taking ownership of their own source of supply. The critical in this is for the companies to optimize performance. Companies have come to realize that in dealing with another company in their chain of supply, both stand to benefit from the other’s performance.

A second reason for the existence of supply chain management lies in increased competition both nationally and internationally. The key objective is to achieve excellent customer service by having the right product at right time, while making use of the right channels.

The third reason is that companies have started to realize that by optimizing one department, optimum performance for the company as a whole may not be the end result. The conclusion that can be drawn is that it is necessary for the organization to look across the entire supply chain to see how one area may influence the rest.

The purpose of supply chain management is to optimize the overall performance of a company. Whether companies are operating on a national or global basis the competition is ever increasing and offering products at the lowest possible cost with the best possible customer service is a way to ensure market share. There needs to be sharing of information in order to achieve visibility of all activities across the supply chain and eventually obtain an optimized supply chain.

supply chain

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management:
1) Location
2) Production
3) Inventory
4) Transportation (distribution)
And there are both strategic and operational elements in each of these decision areas.