Introduction to Supply Chain Management

Introduction to Supply Chain Management

In this lesson, you’re expected to:
– understand what a supply chain is
– learn the basics of supply chain management
– explore the dynamics of a supply chain network

What is a supply chain?


”A set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a customer.”

– Mentzer, et al. (2001)

Supply Side vs. Demand Side

A supply chain consists of all parties involved in fulfilling a customer request.

Image Source: adapted from Slack et al. (2010)
Enlarged version:
A supply chain consists of all parties involved in fulfilling a customer request, including the ”main operation”, its suppliers, transporters, warehouses, retailers, and customers.

The concept of supply chain can be understood at different levels:

– Direct supply chain: a company, a supplier and a customer.
– Extended: direct supply chain plus suppliers’ suppliers and customers’ customers.
– Ultimate: all entities upstream and downstream.

Types of Supply Chain Flows

A supply chain is dynamic and involves a constant flow of physical products, services, information, ownership, and funds

Reference: adapted from Chopra & Meindl (2013)
Enlarged version:
[Optional] Supply Chain
Check out this article to learn more:
Definition of Supply Chain Management

“The systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of individual companies and the supply chain as a whole”

– Mentzer et al. (2001)

Operations is included in the definition of supply chain management: 
– Demand Management
– Purchasing (Procurement)
– Inventory Management
– Production
– Physical Distribution Management

The definition also includes the coordination with other traditional business functions, such as: 
– Marketing & Sales
– Research & Development
– Customer Service
– Information Systems
– Finance

Note: there are several other activities not listed here, e.g. production, supply chain contracts and coordination, risk management etc.
Overview of some Operations Activities related to Supply Chain Management
* Non-exhaustive
Enlarged version:
[Optional] Supply Chain Cycle
Take a look at this 2-minute video from the Council of Supply Chain Management Professionals:
Understanding the entire network
  • In order to effectively manage the supply chain, it is necessary to understand the dynamics of the entire network.

    • In a current globalized business environment, several companies have started to implement business strategies that rely on supply chain management as a major source of competitive advantage (e.g. Apple, McDonald’s, Amazon, Unilever, P&G, Samsung, Zara etc.)

    • Supply chain management implies the idea of understanding the entire network, not only the operations of a single business.

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  • Importance of Understanding the Supply Chain

    Understanding the supply chain is helpful for a company in: 

    – Building a strong competitive position
    – Rolling up the business strategy to the supply chain
    – Understanding the long-term perspective of the network
    – Understanding the needs of the final customer
    – Identifying the links between the nodes in the network
    – Identifying the bottlenecks
    – Controlling the chain’s costs

    Reference: Chopra & Meindl (2013)
[Optional] What is Supply Chain Management?
Watch this fun introductory 8-minute video from Arizona State University:
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