The Emergence of Supply Chain

Managers in the last two decades have witnessed a period of change unparalleled in the history of the world, in terms of advances in technology, globalization of markets, and stabilization of political economies. With the increasing number of "world-class" competitors both domestically and abroad, organi­zations have had to improve their internal processes rapidly in order to slay competitive. In the 1960s -1970s, companies began to develop detailed market strategies, which focused on creating and capturing customer loyalty. Organizations also realized that strong engineering, design, and manufacturing functions were necessary in order to support these market requirements. Design engineers had to be able to translate customer needs into product and service specifications, which then had to be produced at a high level of quality and at a reasonable cost. As the demand for new products escalated in the 1980s, manufacturing organizations were required to become increasingly flexible and responsive to modify existing products and processes or to develop new ones in order to meet ever-changing customer needs. As manufacturing capa­bilities improved in the 1990s, managers realized that material and service inputs from suppliers had a major impact on their organizations' ability to meet customer needs. This led to an increased focus on the supply base and the organization’s sourcing strategy. Manager also realized that producing a quality product was not enough. Getting the products to customers when, where, how, and in the quantity that they want, in a cost-effective manner, constituted an entirely new type of challenge. More recently, the era of the "Logistics Renaissance" was also born, spawning a whole set of time-reducing information tech­nologies and logistics networks aimed at meeting these challenges.

As a result of these changes, organizations now find that it is no longer enough to manage their organizations. They must also be involved in the management of the network of all upstream firms that provide inputs (directly or indirectly), as well as the network of downstream firms responsible for delivery and af­ter-market service of the product to the end customer. From this realization emerged the concept of the "supply chain".

The Definition of Supply Chain Management

The supply chain activities encompass all associated with the flow and transformation of goods, the flow of information from the raw materials supplier to the end user, as well as the reverse flow of materials and information in the supply chain.

Supply chain management is the integration of these activities through improved supply chain rela­tionships, to achieve a sustainable competitive advantage.