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What is supply chain management?

We want to look at a business entity not as a unique, stand alone presence but as part of an inter-connected and inter-dependent chain or pipeline or network. Each of these words helps to demonstrate the concept whether we label this as a supply or value one.

The supply title suggests to some people that we are only looking back upstream to the sources of raw materials and supplies of goods and services.

The value title suggests we should work back from the customers whose perceptions of value drive their purchases and, when they pay, all of the other business which feed the final supplier also benefit.

To some extent this is a spurious argument but what is really important is that the connections run from raw material to final consumer and increasingly back again as a result of re-cycling.

There is therefore talk about cradle to grave for products but maybe we should talk of cradle to second (or more) life as products are re-used, re-cycled or re-purposed.

For a business which is not a major brand in its own right then they will have multiple customers and multiple suppliers. The relative importance of each of these might change dynamically so the larger concept of network might be a better way to think of these things.

However most contracts are between two parties (dyads) and these are embedded in layers of other contracts across the network.

An example of the supply chain for a high definition TV is illustrated on the the Council of Supply Chain Management Professionals’ website.

We need to realise that when we contract to buy anything there is a complicated set of business to business relationships in place even if we are not immediately aware of them.

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This article is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton