What is 'supply chain'?
Three definitions highlight the dynamic way supply chain managers must think to remain competitive.
The links of the supply chain are visible in the border cities of El Paso, TX and Ciudad Juarez, Mexico. Truckers line up at the international border crossings for hours at a time each day, BNSF Railway runs through the heart of town, and third party logistics providers – ranging from storage facilities to freight forwarders and customs brokers – abound.
In turn, supply chain executives thrive in this region where the economic culture blends Anglo-Saxon institutions, East-Asian corporate dynamics and a Latin American reliance on relationship building.
Supply chains arguably are the lifeblood of these cities’ economies – but even there, amid the visibility, explaining supply chain proves a challenge. A retailer, manufacturer and trucker will often offer different answers to the otherwise definitive question, “what is supply chain?” After all, every link – from procurement to fulfillment, custom broker to carrier – plays a distinct, but critical role for the benefit of the whole.
Supply chain professionals are often the last line of defense in the face of disruption, having to analyze and react to adverse circumstances quickly
Supply Chain Dive
The challenge for today's supply chain manager is not only to know both of internal and external factors affecting their products, but the way all the links in the chain think about it as well.
As a trade publication, Supply Chain Dive aims to provide this information … but to do so – in the hopes of explaining our coverage and inviting debate – we must first hone in on what it means to cover the supply chain.
In our view, supply chain can have three distinct meanings per the professional’s role within the chain. They are:
- As a concept, the words speak to the procurement-to-fulfillment cycle applicable to every finished good.
- As a function, the supply chain is the management of inventory levels through the coordination of buyers and suppliers, to ensure on-time delivery without failure.
- As an industry, the supply chain refers to the carriers, operational infrastructure and regulatory landscape responsible for the transport of goods.
What is supply chain? A brief history of an ill-defined term
Explaining supply chains to people outside the field may be one of the toughest, yet most frequent challenges faced by industry professionals. The concept’s breadth often leaves ample space for disagreement about supply chain’s role within a business. Supply chains as a concept are constantly changing, forcing its professionals and industry to adapt to shifting definitions.
At its core, from the time of the first mercantile economies in Denmark to today’s globalized world, companies have always had to deal with suppliers, carriers and customers. Such a history may lead some to believe “supply chain” to have an established definition and storied past.
Yet, a Google Books Ngram Viewer analysis, which tracks term usage in published books over time, shows the concept originally solidified in the 1970s and then grew in popularity over the past two decades. “Supply management” is not much older – gaining popularity in the 1920s – and “procurement” has been around since the 1800s. Because of its novelty and rapid changes in the world market, supply chain remains a controversial term – shifting per the user’s needs.
The leading supply chain management associations don’t even agree on the definition.
APICS, for example, emphasizes the movement of goods and information within its definition, while CSCMP emphasizes the “linking” aspect of supply chain management, including procurement and logistics management and production within the definition.
If one thing is clear upon comparing definitions is that supply chains are both tangible and intangible, and the manager – the link between the two worlds – must balance real needs with theoretical buyer, supplier and corporate demands. In other words, understanding supply chain as an industry, function and concept are all pivotal to ensure competitiveness in a globalized world.
The industry: the business of freight transport
Supply chains can exist in any industry, but the necessity to move goods from suppliers to buyers has long given rise to the industry of freight transport, storage and management.
Ports, shipping lines, trucking companies, customs brokers, highway administrators and storage providers all form part of the industry. The industry is old, highly competitive, largely relationship-based and highly regulated.
In addition, as supply chains increase in complexity and technology advances, a new brand of supply chain industry vendors is arising. Software as a Service (SaaS) providers have risen as complimentary partners to help reduce margins. The industry, some would say, is ripe for technological disruption.
The supply chain manager may not always be in direct contact with the industry, deferring at times to operations and logistics managers within the corporate sphere, but industry disruptions can have large repercussions on lead times and freight rates. It is essential the supply chain manager remain aware of and actively engage with industry trends.
The managers: optimizing margins with phones and data
Supply chain managers are by and large bridge-builders within corporations, and positive relationships require active communication, both internally and externally.
For example, a manufacturer may silo the procurement, materials management, quality control and logistics management teams – but the supply chain manager seeks to be actively informed of any disruptions within these teams to ensure quality and on-time delivery standards are met.
In other words, supply chain professionals are often the last line of defense in the face of chain breakdowns, having to analyze and react to adverse circumstances quickly, while maintaining protocols and budgets. When time is of the essence, phones, e-mails and data are indispensable.
In a way, supply chain management is like a language: different dialects may pervade per the location (industry), but a strong grasp of the fundamentals (think lean manufacturing or six sigma) will ensure across-the-board growth.
Consequently, the supply chain manager must remain informed of effective skills, best practices and trends in logistics management, procurement and inventory management alike.
The supply chain: a tug-of-war between industry and managers
The industry and the manager, while related, point to two very distinct aspects of the value chain – which is the main difficulty in defining the supply chain. “Supply chain” as a concept is neither one nor the other, but the constant, dynamic interaction between the two.
It represents the process from procurement to fulfillment, heavily reliant on the supply chain manager’s back-and-forth interaction with the industry. While the industry relies on production rates for its revenue, the manager depends on the industry’s effectiveness to optimize forecasts and daily costs.
However, it’s important to note the issues affecting the industry and management practices are often separate from those affecting supply chains in general.
That’s why it is so important to think of supply chains as a concept, rather than a set of actors or processes. Changes in social, political and economic preferences may affect all supply chains without impacting either the industry or function.
The talent crisis, the rise of sustainability, improvements in technology, crackdowns on modern slavery all promise to shift supply chains in the long-run, even if the other two aspects have yet to focus on these issues.
To ignore general supply chain issues in favor of small-scale disruption management would be a lack of foresight, so while often overly optimistic, company case studies can show the big-picture strategies employed by corporate pioneers.
So, what is supply chain? The news we cover suggests it is a concept, a function and an industry at once. The supply chain manager must remain informed of trends between the three to ensure future competitiveness.
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