Defining the Supply Chain

Stephen DeAngelis

January 20, 2011

A senior IBM consultant who anonymously writes the blog @ Supply Chain Management, recently wrote a post that asks: What is the Supply Chain? [10 January 2011] The author decided that this is an intriguing question because it is so difficult to answer. The IBMer writes:

“Do you know that this is the most frequently searched Google phrase that drives people to my site (and I’m sure very many other sites in this space as well)? Ah, this is easy enough to answer and so I posed the question to myself: What exactly is the Supply Chain? I must confess that I really couldn’t come up with an answer that didn’t suffer from some rebuttal or the other. So I pose it to you as well – What is the Supply Chain?”

David Blanchard, in his book entitled Supply Chain Management: Best Practices, asks the same question. He writes:

“What exactly is a supply chain? There are plenty of definitions for the term, and we’ll look at a couple of them, but this question gets asked so often because the answer tends to change depending on who’s doing the telling. It’s like the old fable about the blind men who stumble on an elephant and try to tell each other what the elephant is like: The man holding the leg thinks the animal looks like a tree; the man holding the tail thinks an elephant resembles a rope; a third man who grabbed a tusk thinks the whole animal must be like a spear. Each of their answers is partly right, but anybody who has actually seen an elephant smiles at the story because they know these blind men are missing the big picture.”

Cute story, you say, but it gets us no closer to answering the question at hand; but, in a way its does. A manufacturer like Dell, that eschews traditional brick-and-mortar retail stores, has a very different supply chain model than a more traditional retailer like Walmart. Nevertheless, Blanchard believes there are enough common elements in those supply chains that he defines a basic supply chain this way:

“A supply chain, boiled down to its basic elements, is the sequence of events and processes that take a product from dirt to dirt. … A supply chain, in other words, extends from the ultimate supplier or source … to the ultimate customer. … So whether you’re talking about an Intel semiconductor that begins its life as a grain of sand or a Ford Explorer that ends its life in a junkyard where its remaining usable components (tires, seat belts, bumpers) are sold as parts, everything that happens in between those ‘dirt to dirt’ milestones encompasses some aspect of the supply chain.”

That’s a pretty good description. Blanchard goes on to note that “the concept of supply chain management” can be summarized “in just five words: plan, source, make, deliver, and return.” Michael Hugos notes that the term “supply chain management” arose in the late 1980s. Hugos also realizes that there is no single accepted definition of a supply chain. In his book Essentials of Supply Chain Management, he provides three:

 

  • “‘A supply chain is the alignment of firms that brings products or services to market.’ (Douglas M. Lambert, James R. Stock, and LIsa M. Ellram, Fundamentals of Logistics Management)
  • “‘A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves…’ (Sunil Chopra and Peter Meindl, Supply Chain, Second Edition)
  • “‘A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.’ (Ram Ganeshan and Terry P. Harrison, ‘An Introduction to Supply Chain Management’)”

 

The supply chain is not linear — in either time or direction — as shown by the simplified graphic below. The very complex nature of the supply chain is what makes it so difficult to define.

 

 

This brings us back to the post by our senior IBM Consultant. He continues:

“Now some may hearken to the introduction that most have of the supply chain that usually have the neat diagrams that connect material flow from neat boxes of producers, intermediaries etc and information flow in the reverse direction. But is that what it is? In the sense, does the activity of material and information flow define Supply Chain Management? In other words, is Supply Chain Management just an activity descriptor? Well, if it is not just an activity descriptor –- then you can safely put away transportation, warehouse and all sorts of other management. Inventory Management? So let’s move up that chain to see whether it is about the customer? Forecasting? S&OP? In other words, is it about getting an analytical feel for the way demand is going to be or a structured process about marshalling a firm’s resources and fulfilling that demand whatever that might be? Again, how is this different from some definite activity? Alright, maybe it is not one activity but a rhythm of many activities that must be more or less in harmony. So how is that different from just Operations Management with a new focus on getting all the links functioning together? You see where I’m going … Perhaps we take the easy route and point to an activity (or activities) or point to a piece of software (ERP, MRP, SCM, TMS, WMS etc)? If someone came to you and asked you – ‘What is Supply Chain Management?’, what would you say?”

You might have noticed that the consultant went from asking “What is the supply chain?” to asking “What is Supply Chain Management?” They are different questions even though they relate to the same topic. Hugos provides us with two definitions of supply chain management. He writes:

 

  • “‘[Supply chain management is] the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-range performance of the individual companies and the supply chain as a whole.’ (John T. Mentzer, William DeWitt, James S. Keebler, Soonhong Min, Nancy W. Nix, Carlo D. Smith, and Zach G. Zacharia, ‘Defining Supply Chain Management,’ Journal of Business Logistics)
  • “‘Supply chain management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served.’ (Michael Hugos)”

 

In the end, Blanchard probably had it right when he implies that where you sit determines what you see. If dealing with the complexities of the supply chain were easy, there wouldn’t be so many books, magazines, blogs, and college courses dedicated to the subject. The lines between business sectors and business operations are not as distinct and defined as a tidy mind might like. That is why “management” is a key term in supply chain management. SCM is not a science but an art. A good SCM professional must be a manager, a negotiator, a visionary, a philosopher, and, occasionally, a saint (because he has to deal with all of devils in the detail).