Chapter 1: The Origins of Contemporary Supply Chain Management - Supply Chain Vector [Electronic resources] : Methods for Linking the Execution of Global Business Models With Financial Performance نسخه متنی

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Supply Chain Vector [Electronic resources] : Methods for Linking the Execution of Global Business Models With Financial Performance - نسخه متنی

Daniel L. Gardner

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Chapter 1: The Origins of Contemporary Supply Chain Management


The emergence of supply chain management (SCM) as the leading philosophy of companies committed to international trade has by no means been a mercurial event. More of an evolutionary process, the tenets of SCM were born in the markets of Europe, Asia and the United States and can be traced back to the first decades of the 20th century. Unlike some of its more faddish counterparts, SCM has a rich history that not only marks its place in the annals of commerce but also substantiates its relevance to business practitioners of all types.

For purposes of creating future value, it is the maturation of SCM and its ability to adapt to the demands of a global environment that will galvanize its claim as the driving force behind international business. That being said, certain conditions must exist within any enterprise in order for the SCM philosophy to generate tangible results:

The fundamental philosophy and its core beliefs, purpose and financial relevance must be clearly defined and communicated to an organization and its extended enterprise.

The strategic and tactical elements of SCM must be innate to the corporate culture and personality of an enterprise.

Quantifiable links between supply chain execution and financial performance must be identified and exploited throughout the organization.

Measurement tools must be applied that correspond to and are aligned with the SCM philosophy.

Each of these points will be dealt with in detail throughout the balance of this book. However, one cannot begin to discuss these issues without first establishing a baseline for SCM and its meaning in a contemporary framework. Because modern SCM is as all-encompassing as international trade itself, a definition that transcends industry, function, geography and culture is called for. Additionally, any definition must consider the timeless motives of capitalist enterprise, with a focus on the financial realities that drive business today: growth, profitability, liquidity and asset utilization. Using these points as a frame of reference, the following interpretation is offered:

SCM is a business philosophy founded upon the shared understanding of an enterprise's vision, mission and strategy, both within the organization and among its key constituents. Successful SCM recognizes the interdependencies between functional areas, as well as the need to integrate processes throughout the enterprise.

True SCM also links the dynamic of client, supplier and strategic partner activities to the value chain, continuously working to balance profitability with customer satisfaction. Fundamental to supply chain activities are landed cost improvements, stabilization of lead times and the need to match inventory investments with timely product availability. Ultimately, the entire supply chain is linked through information technology, creating ubiquitous visibility and access to information.

Upon isolating the core components of this definition and comparing them with the goals of businesspeople at the beginning of the last century, it seems that little has changed in commerce over the last 100 years. While recognizing the schism between Western and Japanese business models, it remains that the profit motive will never falter and the essence of balance sheet and income statement management has changed very little (excepting the recent financial alchemy used to arrive at reported results). In this context, why all the hype over SCM and its relevance to business today?

Since the first seedlings of the multi-national appeared in the early 1900s, many dynamics have played upon the evolution of those early business models. Although an argument could be made as to the impact of technology, product branding or changing demographics on business, to grasp why SCM is so important one need only look at two fairly recent commercial developments: globalization and outsourcing. Without an understanding of what each has meant to commerce in the latter part of the 20th century and, more importantly, their role in the first years of the new millennium, businesspeople will never fully be able to harness the power of the SCM philosophy.

However, in order to understand the part that SCM plays in the era of globalization and outsourcing, the enlightened manager must first look to the origins of the discipline and understand its history over the last hundred years. Whereas the term SCM came into vogue overnight, one can be assured that the benefits and tactics behind the hyperbole were born of the hard work of many talented people over a long period of time. Unfortunately, the emphasis of businesses on tag lines and platitudes as opposed to operational excellence has somewhat jaded the short-term significance of SCM. Notwithstanding any cynicism, it is the businessperson who has a historical appreciation of the discipline while placing its timeless principles in the context of international business who has the greatest probability of reaping its longer term benefits.

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