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The Strategic Importance Of Supply Chain Management

2046 words - 8 pages

420122139420122139SYNOPSISThis report illustrates the concept of logistics and supply chain management and how supply chain management is gaining more importance in the competitive environment. The first section of the report briefly explains the development of the concept of supply chain management. The second section highlights the main reasons for the importance of supply chain management in aspects of historical reasons, cost concern, customer concern, information technology and globalization. It also discusses the benefits of implementing an effective supply chain strategy include better alignment with corporate strategy, improved efficiency and improved competition positioning. Examples of well-known firm such as Dell and Zara have been used to support my selection of reasons for the strategic importance of supply chain management.1 INTRODUCTIONThe purpose of the report is to address why Supply Chain Management (SCM) is continually gaining importance in today's marketplace. The report identifies five drivers of the necessity of SCM and also highlights three main benefit of applying an effective supply chain strategy. Real-world cases like Zara and Dell are used to help illustrate key issues in SCM.1.1 CONCEPT OF LOGISTICS AND SUPPLY CHAIN MANAGEMENTThe theory of business logistics, comes from the Greek word 'logistikos' for 'skilled in calculating', was evolved from military logistics after World War II (Pienaar and Vogt 2009). In modern business world, logistics was defined as ' that part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and then point of consumption in order to meet customers' requirements' (Pienaar and Vogt 2009). Supply chain management, therefore, has a broader concept which not only involves all logistics management, but also includes collaborations and coordination with each partner in the supply chain (Pienaar and Vogt 2009).1.2 THE GOAL OF SUPPLY CHAIN MANAGEMENTSupply chain management, as a part of corporate strategy, is aimed to help organizations survive in today's marketplace. It involves both adapting to changes in the big environment as well as building competitive advantages.2 PRIMARY REASONS FOR THE STRATEGIC IMPORTANCE OFSUPPLY CHAIN MANAGEMENT2.1 KEY DRIVERS OF SUPPLY CHAIN MANAGEMENT2.1.1 Obsolete historical order fulfillmentHistorical order processing was lengthy and inefficient. Back in 1980s and 1990s, it took weeks even months from customers initiating an order to final delivery of the goods (Sanders 2011). Once an order was placed by a customer either by telephone or fax, it would be confirmed manually or electronically before it was conveyed to distribution centers. Then the right transportation methods were picked by DC to deliver the order. During the process, everything could go wrong such as wrong information of order, shortage of inventory, goods...

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