Based on experience & researching, key components of SCM can be divided into 12 areas:
1. Location
2. Transportation and logistics
3. Inventory and forecasting
4. Marketing and channel restructuring
5. Sourcing and supplier management
6. Information and electronic mediated environments
7. Product design and new product introduction
8. Service and after sales support
9. Reverse logistics and green issues
10. Outsourcing and strategic alliances
11. Metrics and incentives
12. Global issues.
Key-1: Location
Pertains both qualitative and quantitative aspects of facility location decisions. This includes models of facility location, geographic information systems (GIS), country differences, taxes and duties, transportation costs associated with certain locations, and government incentives. Exchange rate issues fall in this category, as do economies and diseconomies of scale and scope. Decisions at this level set the physical structure of the supply chain and therefore establish constraints for more tactical decisions.
Key-2: Transportation and logistics
Category encompasses all issues related to the flow of goods through the supply chain, including transportation, warehousing, and material handling. This category includes many of the current trends in transportation management including vehicle routing, dynamic fleet management with global positioning systems, and merge-in-transit. Also included are topics in warehousing and distribution such as cross docking and materials handling technologies for sorting, storing, and retrieving products. Because of globalization and the spread of outsourced logistics, this category has received much attention in recent years. However, we will define a separate category to examine issues specifically related to outsourcing and logistics alliances. Both deterministic (such as linear programming and the traveling salesman problem) and stochastic optimization models (stochastic routing and transportation models with queuing) often are used here, as are spreadsheet models and qualitative analysis. Recent management literature has examined the changes within the logistics functions of many firms as the result of functional integration and the role of logistics in gaining competitive advantage.
Key-3: Inventory and forecasting
These components include traditional inventory and forecasting models. Inventory costs are some of the easiest to identify and reduce when attacking supply chain problems. Simple stochastic inventory models can identify the potential cost savings from, for example, sharing information with supply chain partners, but more complex models are required to coordinate multiple locations.
Key-4: Marketing and channel restructuring
These components include fundamental thinking on supply chain structure and cover the interface with marketing that emerges from having to deal with downstream customers. While the inventory category addresses the quantitative side of these relationships, this category covers relationship management, negotiations, and even the legal dimension. Most importantly, it examines the role of channel management and supply chain structure in light of the well-studied phenomena of the bullwhip effect that was noted in the introduction.
The bullwhip effect has received enormous attention in the research literature. Many authors have noted that central warehouses are designed to buffer the factory from variability in retail orders. The inventory held in these warehouses should allow factories to smooth production while meeting variable customer demand. However, empirical data suggests that exactly the opposite happens. Orders seen at the higher levels of the supply chain exhibit more variability than those at levels closer to the customer. In other words, the bullwhip effect is real. Typically causes include those noted in the introduction, as well as the fact that retailers and distributors often over-react to shortages by ordering more than they need.
Key-5: Sourcing and supplier management
While marketing focuses downstream in the supply chain, sourcing and supplier management looks upstream to suppliers. The location category addresses the location of a firm’s own facilities, while this category pertains to the location of the firm’s suppliers. Some firms are putting part specifications on the web so that dozens of suppliers can bid on jobs. GE, for instance, has developed a trading process network that allows many more suppliers to bid than was possible before. The automotive assemblers have developed a similar capability; and independent Internet firms, such as Digital Market, are providing services focused on certain product categories. Other firms are moving in the opposite direction by reducing the number of suppliers, in some cases to a sole source. Determining the number of suppliers and the best way to structure supplier relationships is becoming an important topic in supply chains. Much of the research in this area makes use of game theory to understand supplier relationships, contracts, and performance metrics.
Key-6: The information and electronic mediated environments
This category addresses long-standing applications of information technology to reduce inventory and the rapidly expanding area of electronic commerce. Often this subject may take a more systems orientation, examining the role of systems science and information within a supply chain. Such a discussion naturally focuses attention on integrative ERP software such as SAP, Baan and Oracle, as well as supply chain offerings such as i2’s Rhythm and Peoplesoft’s Red Pepper. The many supply chain changes wrought by electronic commerce are particularly interesting to examine, including both the highly publicized retail channel changes (like Amazon.com) and the more substantial business to business innovations (like the GE trading process network). It is here that we interface most directly with colleagues in information technology and strategy, which again creates opportunities for cross-functional integration.
Key-7: Product design and new product introduction
These are deals with design issues for mass customization, delayed differentiation, modularity and other issues for new product introduction. With the increasing supply chain demands of product variety and customization, there is an increasing body of research available. One of the most exciting applications of "supply chain thinking" is the increased use of postponed product differentiation.
Traditionally, products destined for world markets would be customized at the factory to suit local market tastes. While a customized product is desirable, managing worldwide inventory is often a nightmare. Using postponement the product is redesigned so that it can be customized for local tastes in the distribution channel. The same generic product is produced at the factory and held throughout the world.
Key-8: The service and after sales support
This category addresses the critical, but often overlooked, problem of providing service and service parts. Some leading firms, such as Saturn and Caterpillar, build their reputations on their ability in this area, and this capability generates significant sales. Stochastic inventory models for slow-moving items fall into this category, and there are many papers on this topic related to inventory management and forecasting. While industry practice still shows much room for improvement, several well-known firms have shown how spare parts can be managed more effectively.
Key-9: Reverse logistics and green issues
These are emerging dimensions of supply chain management. This area examines both environmental issues and the reverse logistics issues of product returns. Because of legislation and consumer pressure, the growing importance of these issues is evident to most managers. Managers are being compelled to consider the most efficient and environmentally friendly way to deal with product recovery, and researchers have begun significant effort in modeling these systems.
Key-10: Outsourcing and strategic alliances
This category examines the supply chain impact of outsourcing logistics services. With the rapid growth in third party logistics providers, there is a large and expanding group of technologies and services to be examined. These include fascinating initiatives such as supplier hubs managed by third parties. The rush to create strategic relationships with logistics providers and the many well-published failures have raised questions about the future of such relationships. In any case, outsourcing continues to raise many interesting issues.
Key-11: Metrics and incentives
This category examines measurement and other organizational and economic issues. This category includes both measurement within the supply chain and industry benchmarking. Because metrics are fundamental to business management, there are many reading materials outside of the supply chain literature, including accounting texts for instance. Several recent articles concentrate on the link between performance measurement and supply chain improvement.
Key-12: Global issues
Examines how all of the above categories are affected when companies operate in multiple countries. This category goes beyond country specific issues, to encompass issues related to crossboarder distribution and sourcing. For example, currency exchange rates, duties & taxes, freight forwarding, customs issues, government regulation, and country comparisons are all included. Note that the location category, when applied in a global context, also addresses some of these issues.
