Вы находитесь на странице: 1из 13

The Facts and Features of the Supply

Chain Network






I. Table of Contents


1. Scope of work 3

2. Supply Chain Network 4

3. Benefits and Problems 6

4. Changes in Supply Chain Network 8

5. Supply Chain Strategy 9

6. Conclusion 10

7. Bibliography 11



II. Declaration







3

1. Scope of work
Recently the term supply chain management became more and more important in the
world of business. Although well known in the English speaking parts of the world, there
are still few publications in other areas
1
. Due to the rapid development in technology and
other areas, the simple supply chain evolved into a more complex structure, the supply
chain network. Even though supply chains are still common, more and more companies try
to advance their supply chains by changing them into networks
2
. With this alteration they
are able to see the whole picture
3
, whereby they develop a better understanding of the
material and information flow. Because of this the following work is concerned with the
facts and features of the supply network. There are a variety of different aspects which are
important for a good understanding of the supply chain. This piece of work will deal with
four different areas of these aspects; therefore there are four chapters in the main body.

Firstly, the ordinary supply chain is explained and then distinguished from the advanced
network form. Based on these facts the third chapter deals with the problems and benefits
which a supply chain network keeps at hand. In the bygone years some major changes,
apart from evolving into a network, occurred within supply chains.
To acknowledge this, the fourth chapter is devoted to three of these changes. As in any
other business matter, there are several strategies used to organize and optimize the
features of a supply chain network. The fifth chapter hence gives a brief overview about
the most important ones. Lastly, a conclusion reviews the forgone information.








1
Cf. Werner H. (2000): n.p.
2
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
3
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
4

2. Supply chain Network
In order to know what supply chain network is, it is essential to know its sole parts. There
are several different approaches to how a supply chain can be defined. This work will deal
with a broad overview of the most common ones. The supply chain emerged from the
value chain in the mid-eighties
4
. A value chain measures the self-provided attainments
toward the manufacturing of a product of a company without the efforts of connected
firms
5
. In this model, the different parts of a production were seen as detached from each
other. However, a supply chain looks at all the interfaces of a production
6
.
Thus a supply chain can be defined as a chain of entities, directly or indirectly interlinked
and interdependent in serving the same consumer or customer. It comprises of vendors that
supply raw material, producers who convert the material into products, warehouses that
store, distribution centers that deliver to the retailers and retailers who bring the product to
the ultimate user
7
.

There are two different linkages between the Organizations, which can either be upstream
or downstream.
8
The upstream link is concerned with the movement of elements to the
supplier and can be considered the source of the supply chain
9
. The other way around the
downstream link is describing elements which are moved towards the costumer or a
following supplier. These elements can have different natures such as materials,
information or financial data
10
. Downstream linkages mainly ensure that all the parts are of
good quality and that the processes are done correctly to make sure that the end product
has the required quality
11
. In the end, all products reach consumers through a type of
supply chain, however the size and structure of the supply chain depends on the product
and how well the supply chain is planned.
12

Knowing this about supply chains, it is obvious that there is just one source of income for
the whole chain the end customer.
13
Within a supply chain good communication is
indispensable, since every decision may affect every other participating company. If a
decision ignores the interest of another chain member, it would only lead to longer holding

4
Cf. Werner, H. (2000): p. 4.
5
Cf. Werner ,H. (2000): p. 4.
6
Cf. Werner, H. (2000): p. 4.
7
Cf. Voigt, K.I. (n.d): p. 1.Online in the Internet
8
Cf. Rouse, M. (2010): p. 1.Online in the Internet
9
Cf. Blakinship, K. (n.d): p. 1.Online in the Internet
10
Cf. Blakinship, K. (n.d): p. 1.Online in the Internet
11
Cf. Blakinship, K. (n.d): p. 1.Online in the Internet
12
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 6.
13
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 6.
5

time within the chain and therefore to higher prices, lower service levels and ultimately to
a lower demand
14
.
Most importantly the focal firm, or initiator firm, is responsible for providing the suppliers
with all their necessary data in order for them to be able to make the right decisions
15
.
Additionally there are also firms which are not directly involved in a supply chain but also
contribute to the process of bringing it to the end customer. These firms are mainly service
providers like trucking or consultants, even though they are not a direct part of the supply
chain, companies should be aware of how important they are
16
. All in all, it can be said that
a supply chain is concerned with the connections between all the companies needed to
produce a desired outcome.
A supply chain network describes similar but more complex processes. In this type of
organization, companies can be cross-linked and have two-way exchanges between
them
17
.To find and remove inefficiency two types of flow should be mapped. Firstly the
material flow which describes the movement of raw and complete goods and the
information flow which is concerned with the demand for information from the customer
or other supply network members.
18
The most important characteristic of a working supply
chain network certainly is trust among the participating firms
19
. A relation where the focal
firm tries to control everything, e.g. by threatening the supplier, rarely works
20
.
Nonetheless, the entry barriers as well as the possibilities of leaving are relatively low
21
.
In the end, it can be said that the supply network is used to produce two outcomes:
reducing the cost and work time as well as providing a product with the desired quality.
22

The two most effective ways to create a smoothly working supply chain are using modern
technology and/or market intelligence. Market intelligence refers to two different aspects,
which are finding the best and most cost reducing partner as well as gaining information
about customer demands
23
.

3. Benefits and Problems of a supply chain Network
There are several reasons why so many firms are eager to use supply chain networks.

14
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 6.
15
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
16
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 6.
17
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
18
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
19
Cf. Adaptalift Hyster (2011): p. 1. Online in the Internet
20
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 8.
21
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 8.
22
Cf. Wisegeek (n.d): p. 1. Online in the Internet
23
Cf. Wisegeek (n.d): p. 1. Online in the Internet
6

Not only the customers benefit from a supply chain network but there are also several
benefits for every member of a supply chain if it is running smoothly. First, the sales
volume from downstream buyers can be increased
24
. The best supply chains have buyer-
supplier relationships that are based on value and consistent delivery of this value
25
. That
value can be based on services, quality, on-time deliveries, returns management, or some
combination of these, which makes the buyers purchase more from the specific suppliers
for a long time
26
. It also provides an incisive profit for suppliers, but it also negatively
influences the competition
27
. In addition, increased cooperation between supply chain
buyer and seller leads to increased efficiencies
28
.
Moreover, it leads to new product and process innovations borne from the working
relationship between trusting partners
29
.
Competitive global supply chains urges supply chain managers to develop new processes
that improves both cost efficiencies and customer services
30
. For instance, the development
of new a product and new process can be very expensive and risky
31
. Nevertheless, long-
term cooperative partnerships can be seen as the most advanced and original way to
develop processes that both reduce costs and add value for the partners
32
.
Another considerable benefit from long-term supply chain cooperation is saving the costs
that result from the usual operations over the life of the relationship
33
. The relationship
between the buyers and suppliers is often filled with inefficiencies and costly
organizational features in the beginning, which increases the cost of doing business in the
first year but the procedures becomes more efficient and effective in the second year
34
.
Furthermore, there is a possibility that when the companies cooperate for a longer time,
then they reduce more indirect costs the longer the relationship between the cooperation,
the more indirect costs are reduced
35
.
Lastly, a comparison between the absolute and the relative advantage can be made in a
good supply chain network
28
. Absolute advantage is the ability to produce a good using
fewer inputs more efficiently, while Relative advantage is the degree to which a new

24
Myers, M.B.(2010): p.1. Online in the internet
25
Myers, M.B.(2010): p.1. Online in the internet
26
Cf. Myers, M.B.(2010): p.1. Online in the internet
27
Cf. Myers, M.B.(2010): p.1. Online in the internet
28
Cf. Myers, M.B.(2010): p.1. Online in the internet
29
Myers, M.B.(2010): p.1. Online in the internet
30
Cf. Myers, M.B.(2010): p.1. Online in the internet
31
Cf. Myers, M.B.(2010): p.1. Online in the internet
32
Cf. Myers, M.B.(2010): p.1. Online in the internet
33
Cf. Myers, M.B.(2010): p.1. Online in the internet
34
Cf. Myers, M.B.(2010): p.1. Online in the internet
35
Cf. Myers, M.B.(2010): p.1. Online in the internet
7

product is more advantageous to the customers than the competing brands
36
. The supply
chain partners should normally concentrate on the relationships absolute benefits to their
firm and whether those benefits would be achieved if the partnership did not exist
37
. These
benefits may not grow in equal portions to the participants, but as long as the partnership is
mutually beneficial, then all parties should gain greatly in absolute terms
38
. The longer
they cooperate, the more firms from raw material providers to retailers will see benefits
39
.
Apart from all the beneficial aspects, there are sources of problems as well.
These problems mainly occur when a chain member does not use effective supply chain
principles
40
. There are several problems which can occur yet this piece of work will only
focus on a few important ones. The two most common ones both deal with a wrong use of
information. The first one being companies relying on historical trends, which means that
they based their decisions on past performance. However, past performance can never be
considered a valid predictor for the future of a business, no matter how big a company
might be. The second type of problems are decisions based on outdated information. This
can happen if a manager is not familiar enough with real time inventory levels, financial
ratings and cash flows
41
.
Apart from the wrong use of information, there are also problems concerning the
communication between single network members. The hardest part usually is to understand
what the capabilities of a supplier are. A lack of sympathy towards a supplier can
negatively affect a companys ability to react fast when a change in demand happens.
To avoid this, a manager should regularly update his knowledge about the changes within
the suppliers company. Aside from the lack sympathy, the lack of communication in
general is one of the most difficult problems. As mentioned before good communication is
crucial for a good supply chain network
42
. Especially in big, firms supply chains can grow
to huge sizes. This can quickly lead to a loss of control when not handled carefully
notably when a firms operates internationally
43
.
The last main source of problems is technology. Even though it helped significantly to
improve supply chain network it nonetheless needs to be used correctly.

36
Cf. Business dictionaries (n.d): p.1 online on theInternet
37
Cf. Myers, M.B. (2010): p.1. Online in the internet
38
Cf. Myers, M.B. (2010): p.1. Online in the internet
39
Cf. Myers, M.B. (2010): p.1. Online in the internet
40
Cf. Wisegeek (n.d): p. 1. Online in the Internet
41
Cf. Wisegeek (n.d): p. 1. Online in the Internet
42
Cf. Wisegeek (n.d): p. 1. Online in the Internet
43
Cf. Wisegeek (n.d): p. 1. Online in the Internet
8

First, each company need, to figure out which technology is the right one for their specific
needs. In this decision, they need to consider if the other member can afford this
technology as well since it can be quite expensive. While a big focal firm might not have
any problems in financing, smaller supply firms might
44
.
Besides that they also need to ascertain if the same technology is available in every
location needed. This again especially affects international working companies
45
.
Ultimately, it can be said that all the problems which can occur in supply chain network
are either based on wrong planning or financial difficulties.
4. Changes in supply chain network
In the last years, supply chains have evolved rapidly. While the basic concept stayed the
same, some others have changed. In this work three selected aspects are discussed.
The first one is the global expansion of the supply chain in which many companies see a
chance to enter new markets, find new suppliers and thereby maximize their profit
46
.
This has been made possible by the development of the communication and technology
system. A good example is the existence of internet which makes it easier to communicate
to suppliers, manufacturers or retailers all over the world.
47
However the costs and risks
can rise immensely, for example through higher shipping or insurance costs
48
.
Secondly, more and more companies try to make their networks more environmental
aware. This is due to several factors, the first one being environmental regulations
countries installed
49
. Besides that a green supply chain can also minimize costs
effectively, e.g. by recycling their own products. Kodak as an example uses 85 percent of
their single-use cameras again and saves millions of dollars this way
50
.
Lastly, the customers increasingly demand knowledge about where products come from,
how they are made and distributed and what impact on the future these products will
have
51
.
5. Supply chain strategy
A supply chain strategy determines the process of procurement of raw materials,
transportation of the materials to and from the company, manufacture of the product or
operations involved in providing services, and distribution of the product to the customer,

44
Cf. Management study guide (n.d): p. 1.
45
Cf. Management study guide (n.d): p. 1.
46
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 18 ff.
47
Cf. Rosenthal, B.E.(2010): p. 1. Online in the Internet
48
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 18 ff.
49
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 18 ff.
50
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 18.ff
51
Cf. Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): p. 18.ff
9

plus any after sales service and a specification of whether these processes will be
performed in-house or outsourced
52
. To add on to that, the supply chain strategy does not
only define what processes within the firm should do well but what the role played by each
body is
53
. The role played by each body can also be seen as a very important factor, since
they all contribute to the end results of the business activities carried out in the firm.
Besides, the supply chain strategy also includes a specification of the broad structure what
many traditionally call supplier strategy
54
. It also includes the operations strategy
55
, which
is a plan containing details on how a business should effectively use its production
resources to attain its goal.
56
Additionally logistic strategy which is a plan created by the
manufacturing business that clearly indicates how the firm intends to transport its raw
materials to and from the company and also its products to its end consumers and
retailers
57
.
The example of Dells resolution to sell their computers through resellers in the year 2007
and Ciscos decision to use contract manufacturers gives a description of their extended
structure of their supply chain and which are also parts of their supply chain strategy
58
.
Supply chain strategy is also made up of design decisions concerning inventory,
communication and transportation
59
. For instance, a company like Toyota deciding to have
production facilities in each of its major markets is part of its supply chain strategy
60
.
Therefore it can be assumed that for a company to be successful, all activities involved in
their business must run smoothly right from the beginning to the end that is from
production, to delivery and not forgetting the after sales services, if the company also
offers these services.




52
Cf. Chopra, S. & Meindl, P. (2010): p. 38.
53
Cf. Chopra, S. & Meindl, P. (2010): p 38.
54
Cf. Business dictionaries (n.d): p. 1. Online in the Internet
55
Cf .Chopra, S. & Meindl, P. (2010): p. 38.
56
Cf. Business dictionaries (n.d): p.1 online in the Internet
57
Cf. S. Chopra and P. Meindl (2010): p. 38.
58
Cf. Chopra, S. & Meindl, P. (2010): p. 39.
59
Cf. Chopra, S. & Meindl, P. (2010): p. 39.
60
Cf. Chopra, S. & Meindl, P. (2010): p. 39 .

10

6. Conclusion
The goal of this work was to distinguish the supply chain from the supply chain network,
explain the facts and features of the network as well as to ascertain the value of the supply
network to businesses.
It can be said that a supply chain and a supply chain network are similar to each other but
differ in their complexity. Both forms can be of great benefit to a company if they are used
correctly; nonetheless a network allows a company a broader view, in which more factors
can be seen. The problems occurring in a supply chain network are normally due to a
wrong use of strategy or high costs for the needed equipment to start one. Especially focal
firms have to consider the cost of the other firms included in their network.
All in all, supply chain networks are beneficial for companies, customers and, due to recent
changes, even the environment. Relying on these pieces of information companies should
try to figure out how they can improve their individual business by using a matching
supply network, whereat they have to keep an eye on the costs of doing so.














11

7. Bibliography

Chopra, S. & Meindl P. (2010): Supply chain management (strategy, planning and
operation). Fourth edition, Pearson Education Inc.
Stadtler, H. & Kilger C. (2008): Supply Chain Management and Advanced Planning
(Concepts, Models, Software and Case Studies). Fourth Edition, Berlin, Springer-Verlag

Werner, H. (2000): Supply Chain Management (Grundlagen, Strategien, Instrumente und
Controlling). Wiesbaden, Betriebswirtschaftlicher Verlag Dr. Th. Gabler GmbH

Wisner, J.D.& Keong Leong G.& Tan, K.C. (2005): Principles of Supply Chain
Management (a Balanced Approach). United States of America, South-Western, part of the
Thomson cooperation

Myers M.B. (2010): The Many Benefits of Supply Chain Collaboration. In: Supply Chain
Management Review magazine, November 12, 2010
http://www.scmr.com/article/the_many_benefits_of_supply_chain_collaboration/

Adaptalift Hyster (2011): What is a Supply Chain Network? In:
http://www.aalhysterforklifts.com.au/index.php/
about/blog-post/what_is_a_supply_chain_network
(retrieved 20.9.2012)

Blakinship, K. (n.d): What is Downstream Supply Chain Management. In:
http://www.ehow.com/info_7753272_downstream-supply-chain-management.html
(retrieved 20.9.2012)

Business Dictionary (n.d): Relative advantage. In:
http://www.businessdictionary.com/definition/relative-advantage.html
(retrieved 8.10.2012)

Business Dictionary (n.d): Operation strategy. In:
http://www.businessdictionary.com/definition/operation-strategy.html
(retrieved 8.10.2012)
12


Gabler Wirtschaftslexikon (n.d): Supply Chain Management. In:
http://wirtschaftslexikon.gabler.de/Archiv/56470/supply-chain-management-scm-v7.html
(retrieved 15.9.2012)

Management Study Guide (n.d): Supply Chain Management Problems and
Roadblocks. In: http://www.managementstudyguide.com/
supply-chain-management-problems.htm
(retrieved 6.10.2012)

Rosenthal B.E. (2010): Supply Chain Changes: Going Green and Going Global. In:
http://www.outsourcing-center.com/2010-01-supply-chain-changes-going-green-and-
going-global-article-37459.html
(retrieved 6.9.2012)

Rouse, M. (2010): Supply Chain Management. In:
http://searchmanufacturingerp.techtarget.com/definition/supply-chain-management
(retrieved: 20.9.2012)

Wisegeek (n.d): How Do I Make an Effective Supply Chain? In:
http://www.wisegeek.com/how-do-i-make-an-effective-supply-chain.htm
(retrieved 6.10.2012)

Wisegeek (n.d): How Do I Solve Common Supply Chain Problems? In:
http://www.wisegeek.com/how-do-i-solve-common-supply-chain-problems.htm
(retrieved 6.10.2012)