Strategic Importance of Supply Chain Management

This describes the scope of supply chain management (SCM), including the management of procurement, logistics and materials. It explains the importance of just-in-time ideas and techniques and discusses the evolution of the supply chain. Supply chain strategies including global supply chain issues and e-business are also covered. The key objective of supply chain management is to provide customer satisfaction by having the correct product in the correct place at the correct time. Competition worldwide is increasing. Creating customer satisfaction is important to most companies. The concept of satisfaction has multiple dimensions. These dimensions contribute to a feeling of overall satisfaction and are made up of considerations of: ?

• cost - what customers receive for what they paid ?
• convenience - the effort expended to achieve the purchase ?
• confidence in the support services both included and promised

In an age of global markets, supplies and competition, the ability to satisfy and retain customer loyalty is no longer a simple marketing proposition. Back office operations are vital. Firms currently strive to increase competitiveness by providing customisation, value for money, quality and service. Customisation of the service component may for instance include speed to market or responsiveness to customer enquiries. Consider Amazon.com, which provides books selected from the internet store delivered to your door (within a stated time period). The marketing proposition is simple and based on convenience. The same product could be purchased from a bookshop. If the back-office operation of Amazon either takes six weeks to deliver the book once ordered, or fails to meet a promised delivery date, then the probability is that the customer would be dissatisfied. The same applies to FedEx with its delivery next day before 10am promise. Speed is becoming an important aspect of service provision. McDonald's controls its supplies along the entire length of its supply chain from meat purchasing and paper cups to 28,000 franchise outlets worldwide. 

For major companies operating in global markets, the stakes are high.

Managing the supply chain offers the capability to create and reach markets before competitors, and achieve competitive advantage by providing increased customer satisfaction through delivering the right product at the right time at greater value for money as a result of reduced overall cost. The purpose of operations is to support business strategy while the purpose of supply chain management is to support the operations strategy.