This led way to the concept of forming a network of resources, raw materials, components and finished products rolling in and out of a factory, coined as supply chain management.
Supply chain management is the discipline of managing the movement of raw materials into an organisation and the finished products out of the organisation. SCM is an approach that encompasses every process concerned in manufacturing a product, from source to consumption. There has to be a linkage between the suppliers that provide inputs, manufacturing and service support operations that transform the inputs into products and services, and the distribution and local service providers that localize the product (Chase. et al., 2003). This involves building a network that allows a flow of materials, without a break or hitch, throughout the process of production. This flow is fuelled by co-operation, and co-ordination among the diverse channel partners.
Supply chain management thrives on improving efficiency and reducing cost of production by focusing on the core competencies of a company. Functions such as procurement of raw materials and distribution of products are outsourced to companies that are better equipped and more cost-efficient to perform them.
Strategic planning is necessary to develop a network to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. Information technology has helped integrate the various components of SCM by building a network that aids in sharing necessary data between all supply chain partners within a system.
5. Information Technology in Supply Chain Management (800 words)
Today the survival of most companies depends on intelligent supply chain decisions. Firms today have to take full advantage of the internet to become more responsive and to better penetrate customer markets (Chase. et al., 2003). With the advent of IT and internet, communication between supply chain partners has become easier and more cost-efficient. Internet has paved way for integrating the varied partners in the SCM system, to bring them closer through the power of electronic communication.
Automating SCM is the process of building an electronic information network for transactions among supplier-manufacturer-retailer-customer in virtual space using IT. Every company in a large supply chain or distribution chain is dependent on each other. Thus, the unit of value creation has shifted from individual firms to value-networks that consist of partner firms and their close collaboration. SCM consists of choosing what work to outsource to suppliers (make vs. buy) and selecting suppliers to use and negotiating contracts – both the legalities and the culture of the supply chain relationships. (Milak, 2006)
One area where Ford and Toyota have diverged is supplier relations. Armed with cost and quality control at the process level, Toyota can concentrate on a value-based enterprise product strategy focused on customer value. Instead of building and maintaining collaborative supplier strategies, Ford and other American companies concentrate their expertise on mere cost-cutting strategies. Toyota recognizes that fulfilling the enterprise potential of TPS requires a substantial