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Supply Chain/Value Chain

Introduction 
Supply Chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Materials and information flow both up and down the supply chain. 

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

Supply chains may be long and complex, and may involve many different business partners. One frequently see problems in the operation of the supply chains. These problems may result in delays, in customer dissatisfaction, in lost sales, and high expenses that result from fixing the problems once they occur. World-class companies, attribute much of their success to effective Supply Chain Management (SCM), which is largely supported by IT and e-commerce technologies.

When a supply chain is managed electronically, usually with web technologies, it is referred to as an e-supply chain. 

Supply Chain Management (SCM) involves the coordination of all supply activities of an organisation from its suppliers and delivery of products to its customers (figure 1.12):


Figure 1.12 introduces the main players in the supply chain. In figure 1.12(a) the main members of the supply chain are the organisations that manufacture a product and/or deliver a service. 

For most commercial and not-for-profit organisations one can distinguish between upstream supply chain activities which are equivalent to buy-side e- commerce and downstream supply chain activities which correspond to sell-side e-commerce.

Supply chain management includes not only supplier and buyer, but also the intermediaries such as the supplier's suppliers and the customer's customers (figure 1.12(b)). Indeed, figure 1.12(b) is a simplification of some companies which may have first-tier suppliers, second-tier and even third-tier suppliers or first-, second-, and higher-tier customers. Because each company effectively has many individual supply chains for different products, the use of the term 'chain' is limiting and supply chain network is a more accurate reflection of the links between an organisation and its partners. The existence of this network increases the need for electronic communications technology to manage and optimise this network.

Technology is vital to supply chain management since managing relationships with customers, suppliers and intermediaries is based on the flow of information and the transactions between these parties. The main strategic thrust of enhancing the supply chain is to provide a superior value proposition to the customer, of which efficient consumer response is one method.

Success of an e-supply chain depends on the following factors: 
  1. Ability of All Supply Chain Partners to View Partner Collaboration as a Strategic Asset: It is the tight integration, and trust among the trading partners that generates speed, agility, and lower cost. 
  2. Information Visibility along the Entire Supply Chain: Information about inventories at various segments of the chain, demand for products, delivery times, and any other relevant information must be visible to all members of the supply chain at any given time. Therefore, information must be managed properly with strict policies, discipline, and daily monitoring. 
  3. Speed, Cost, Quality, and Customer Service: These are the metrics by. which supply chains are measured. Consequently, companies must clearly define the measurements for each of these four metrics together with the target levels to be achieved. The target levels should be attractive to the business partners.
  4. Integrating the Supply Chain more Tightly: An e-supply chain will benefit from tighter integration, both within a company and across an extended enterprise made up of suppliers, trading partners, logistics providers, and the distribution channel.
Benefits of Using Internet Technologies in Supply Chain Management
  1. Share information about changes in customer demand. 
  2. Receive rapid notification of product design changes and adjustments. 
  3. Provide specifications and drawings more efficiently. 
  4. Increase the speed of processing transactions. 
  5. Reduce the cost of handling transactions. 
  6. Reduce errors in entering transaction data. 
  7. Share information about defect rates and types.

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