# Supply chain management Canonical: https://web4.xpay.bi/en/wiki/wp-en-27995/ Language: en Published: 2026-10-29T23:29:58.379Z Updated: 2026-10-29T23:29:58.379Z In commerce, supply chain management (SCM) deals with a system of procurement (purchasing raw materials/components), operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitori ## Key facts ## Overview In commerce, supply chain management (SCM) deals with a system of procurement (purchasing raw materials/components), operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end-to-end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain. SCM is the broad range of activities required to plan, control and execute a product's flow from materials to production to distribution in the most economical way possible. SCM encompasses the integrated planning and execution of processes required to optimize the flow of materials, information and capital in functions that broadly include demand planning, sourcing, production, inventory management and logistics—or storage and transportation. Supply chain management strives for an integrated, multidisciplinary, multi-method approach. Research in supply chain management focuses on topics such as resilience, sustainability, and risk management, among others. Some suggest that the "people dimension" of SCM, ethical issues, internal integration, transparency/visibility, and human capital or talent management are topics that have been underrepresented on the research agenda. Supply chain management, techniques with the aim of coordinating all parts of SC, from supplying raw materials to delivering and/or resumption of products, tries to minimize total costs with respect to existing conflicts among the chain partners. An example of these conflicts is the interrelation between the sale department desiring to have higher inventory levels to fulfill demands and the warehouse for which lower inventories are desired to reduce holding costs. ## Origin of the term and definitions In 1982, Keith Oliver, a consultant at Booz Allen Hamilton, introduced the term "supply chain management" to the public domain in an interview for the Financial Times. In the mid-1990s, the term "supply chain management" gained popularity when a flurry of articles and books came out on the subject. Supply chains were originally defined as encompassing all activities associated with the flow and transformation of goods from raw materials through to the end user or final consumer, as well as the associated information flows. Mentzer et al. consider it worthy of note that the final consumer was included within these early definitions. Supply chain management was then further defined as the integration of supply chain activities through improved supply chain relationships to achieve a competitive advantage. In the late 1990s, "supply chain management" (SCM) rose to prominence, and operations managers began to use it in their titles with increasing regularity. A supply chain, as opposed to supply chain management, is a set of firms who move materials "forward", or a set of organizations, directly linked by one or more upstream and downstream flows of products, services, finances, or information from a source to a customer. Supply chain management is the management of such a chain. Other commonly accepted definitions of supply chain management include: The management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, company, resellers, and final consumers. The systematic, strategic coordination of traditional business functions and tactics across all business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. A customer-focused definition is given by Hines (2004:p76): "Supply chain strategies require a total systems view of the links in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence, costs must be lowered throughout the chain by driving out unnecessary expenses, movements, and handling. The main focus is turned to efficiency and added value, or the end user's perception of value. Efficiency must be increased, and bottlenecks removed. The measurement of performance focuses on total system efficiency and the equitable monetary reward distribution to those within the supply chain. The supply chain system must be responsive to customer requirements." The integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders. According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries, third-party service providers, or customers. Supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise. Mentzer et al. make a further distinction between "supply chain management" and a "supply chain orientation". The latter term involves a recognition that a business strategy cannot be fulfilled without managing the activities of suppliers and customers upstream and downstream, whereas the former term is used for "the actual implementation of this orientation". Supply chain visibility, in its origins, was concerned with knowledge of the location, production stage and expected delivery date of incoming products and materials, so that production could be planned, but the development of the term has enabled it to be used to plan orders using knowledge of potential supplies, and to track post-production processes as far as delivery to customers. The concept of a "supply chain control tower" reflects the "end-to-end visibility" provided by an air traffic control tower. Writing for Gartner, Ashutosh Gupta sees a "supply chain control tower" as a concept which combines the capacities of "people, process, data, organization and technology" to improve supply chain visibility, noting that the technology behind a system which draws together information from a number of sources should not be separated from the people and processes it supports in order to improve visibility. The UK Government also uses the term "supply chain visibility" in conjunction with its mandate to ensure that potential suppliers have visibility into future supply opportunities. The government's action note on supply chain visibility covers obligations and appropriate contractual wording requiring prime suppliers to advertise sub-contracting opportunities and to report on their spend with small and medium-sized enterprises and voluntary/community organisations within their supply chains. Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships, and control associated business processes. The overall goal of the software is to improve supply chain performance by monitoring a company's supply chain network from end-to-end (suppliers, transporters, returns, warehouses, retailers, manufacturers, and customers). In some cases, a supply chain includes the collection of goods after consumer use for recycling or the reverse logistics processes for returning faulty or unwanted products back to producers up the value chain. ## Functions Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer. As organizations strive to focus on core competencies and become more flexible, they reduce ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners lead to the creation of the concept of supply chain management. Supply chain management is concerned with improving trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. According to Drucker, "the greatest change in corporate culture—and the way business is being conducted—may be the accelerated growth of relationships based not on ownership, but on partnership." This approach allows companies to leverage the strengths and capabilities of various partners to achieve greater efficiency and innovation, ultimately enhancing overall business performance. In recent decades, globalization, outsourcing, and information technology have enabled many organizations, such as Dell and Hewlett-Packard, to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities. This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories. It is not clear what kind of performance impacts different supply-network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms. Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance. In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances, and business partnerships, significant success factors were identified, complementing the earlier "just-in-time", lean manufacturing, and agile manufacturing practices. Second, technological changes, particularly the dramatic fall in communication costs (a significant component of transaction costs), have led to changes in coordination among the members of the supply chain network. Many researchers have recognized supply network structures as a new organizational form, using terms such as "Keiretsu", "Extended Enterprise", "virtual supply chain", "Global Production Network", and "Next Generation Manufacturing System". In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration". Supply chain management is also important for organizational learning. Firms with geographically more extensive supply chains connecting diverse trading cliques tend to become more innovative and productive. The security-management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by the ISO and the IEC. Supply Chain Management draws heavily from the areas of operations management, logistics, procurement, and information technology, and strives for an integrated approach. ## Supply chain risks The importance of supply chain management proved crucial in the 2019-2020 fight against the coronavirus (COVID-19) pandemic that swept across the world. During the pandemic period, governments in countries which had in place effective domestic supply chain management had enough medical supplies to support their needs and enough to donate their surplus to front-line health workers in other jurisdictions. The devastating COVID-19 crisis in US has turned many sectors of the local economy upside down, including the country's storied logistics industry. Some organizations were able to quickly develop foreign supply chains in order to import much needed medical supplies. Cross-border supply chains can increase political risk. ## Supply chain resilience An important element of SCM is supply chain resilience, defined as "the capacity of a supply chain to persist, adapt, or transform in the face of change". For a long time, the interpretation of resilience in the sense of engineering resilience (= robustness) prevailed in supply chain management, leading to the notion of persistence. A popular implementation of this idea is given by measuring the time-to-survive and the time-to-recover of the supply chain, allowing to identify weak points in the system. The APICS Certified Supply Chain Professional (CSCP) program emphasizes the importance of managing risks and enhancing resilience. According to APICS, in order to manage global interruptions and preserve operational continuity, a robust supply chain is vital. More recently, the interpretations of resilience in the sense of ecological resilience and social–ecological resilience have led to the notions of adaptation and transformation, respectively. A supply chain is thus interpreted as a social-ecological system that, similar to an ecosystem (e.g. forest), is able to constantly adapt to external environmental conditions. For example, these three components of resilience can be discussed for the 2021 Suez Canal obstruction, when a ship blocked the canal for several days. Persistence means to "bounce back"; in our example it is about removing the ship as quickly as possible to allow "normal" operations. Adaptation means to accept that the system has reached a "new normal" state and to act accordingly; here, this can be implemented by redirecting ships around the African cape or use alternative modes of transport. Finally, transformation means to question the assumptions of globalization, outsourcing and linear supply chains and to envision alternatives; in this example this could lead to local and circular supply chains that do not need global transportation routes any longer. Public policy can increase the resilience of supply chains. ## Historical developments Six major movements can be observed in the evolution of supply chain management studies: creation, integration, globalization, specialization phases one and two, and SCM 2.0. ## Creation era The term "supply chain management" was first coined by Keith Oliver in 1982. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to Japanese management practices. However, the term became widely adopted after the publication of the seminal book Introduction to Supply Chain Management in 1999 by Robert B. Handfield and Ernest L. Nichols, Jr., which published over 25,000 copies and was translated into Japanese, Korean, Chinese, and Russian. ## Integration era The development of supply chain management has been influenced by advances in information technology. The introduction of electronic data interchange (EDI) systems during the 1960s helped businesses exchange transaction data electronically. During the following decades, enterprise resource planning (ERP) systems integrated functions such as production, inventory management and distribution. From the late 20th century onward, internet-based systems further expanded opportunities for information sharing and coordination among supply chain partners. These technologies have supported efforts to improve operational efficiency, coordinate activities and manage costs. Supply chains can also be classified according to their level of integration. In a stage 1 supply chain, functions such as production, storage, distribution and materials management operate largely as separate systems. In a stage 2 supply chain, these functions are integrated through a coordinated plan, often supported by enterprise resource planning (ERP) systems. A stage 3 supply chain extends integration across organisational boundaries to include upstream suppliers and downstream customers. This may involve sharing information and coordinating activities across the supply chain. ## Globalization era It is the third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains beyond national boundaries and into other continents. Although the use of global sources in organizations' supply chains can be traced back several decades (e.g., in the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, adding value, and reducing costs through global sourcing. ## Specialization era (phase I): outsourced manufacturing and distribution In the 1990s, companies began to focus on "core competencies" and specialization. They abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements, as the supply chain extended beyond the company walls and management was distributed across specialized supply chain partnerships. This transition also refocused the fundamental perspectives of each organization. Original equipment manufacturers (OEMs) became brand owners that required visibility deep into their supply base. They had to control the entire supply chain from above, instead of from within. Contract manufacturers had to manage bills of material with different part-numbering schemes from multiple OEMs and support customer requests for work-in-process visibility and vendor-managed inventory (VMI). The specialization model creates manufacturing and distribution networks composed of several individual supply chains specific to producers, suppliers, and customers that work together to design, manufacture, distribute, market, sell, and service a product. This set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands. ## Specialization era (phase II): supply chain management as a service Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management (storage and inventory), and non-asset-based carriers, and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution, and performance management. Market forces sometimes demand rapid changes from suppliers, logistics providers, locations, or customers in their role as components of supply chain networks. This variability has significant effects on supply chain infrastructure, from the foundation layers of establishing and managing electronic communication between trading partners to more complex requirements such as the configuration of processes and workflows that are essential to the management of the network itself. Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root primarily in transportation and collaboration categories. This has progressed from the application service provider (ASP) model from roughly 1998 through 2003 to the on-demand model from approximately 2003 through 2006, to the software as a service (SaaS) model in focus today. For example, supply chain collaboration platforms connect multiple buyers and suppliers with financial institutions, enabling them to conduct automated supply chain finance transactions. ## Supply chain management 2.0 (SCM 2.0) Increasing volatility has characterized supply chains since around 2003, including significant turbulence around the 2008 financial crisis. Douglass in 2010 referred to an SCM management style known as "extreme supply chain management", which "recognizes the need for collective, rather than sequential, risk management and facilitates collaboration on a new scale that is necessary for survival". ## Sources - Supply chain management · Wikipedia: https://en.wikipedia.org/?curid=27995 Source: Wikipedia contributors — https://en.wikipedia.org/?curid=27995&oldid=1381563991 Licence: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation notice: Reformatted for XPay; the source may be abridged, restructured or translated. 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