The term “supply chain” entered the business scene relatively recently – about 10-12 years ago. It refers to the process of managing concepts and contains the hope that managers will see significant value in investing in a very well-arranged supply chain.
The supply chain is perceived as a specific sequence of activities, i.e., a process or processes focusing on the final recipient, conducted in accordance with a market competitiveness strategy, and related to the effective and dynamic management of physical, financial, and information flows, as well as knowledge that accompanies the movement of products and the provision of services at various stages of their life cycle.
Therefore, companies differ in their supply chains. No two companies have identical supply chains. This is understandable when one accepts that enterprises operate in different environments, have different goals, different patterns, and consequently, different aspects of the supply chain are important to them. The most important of these are presented below. At the same time, it must be remembered that over time and under competitive pressure, changes will occur, including in the approach to supply chain issues.
Functional aspect
This is important in the case of enterprises that do not really think in terms of a supply chain as defined above. The basic issue in this case is the identification of the core functions performed in the enterprise and the subsequent analysis of the supply chain in the context of one of them. Unfortunately, it seems that a functional approach to supply chains, although irrational in terms of benefits, is not an isolated phenomenon. Most initiatives undertaken in this case are local in nature (within the scope of individual functions), and as such, they cannot positively influence the development of the supply chain as defined above: each functional division has its own action program, supervising the connections between divisions within the enterprise is difficult, and between enterprises participating in a given supply chain – it is practically impossible.
Procurement aspect
Moving away from a purely functional view of the supply chain is often driven by the desire to reduce costs, mainly material costs. This is particularly visible in the case of industrial enterprises, where material costs constitute the largest part of total costs. Service enterprises also procure goods and services (e.g., car insurance companies have extensive networks of vehicle repair and maintenance workshops), so the cost of materials and external services also influences decision-making in the procurement sphere, which determines cost reduction. Each time, the management process is directed “where the money is”; in this case, it concerns suppliers and the acquisition process. The result may include, among other things, a revision of supply sources, programs to reduce the number of suppliers, and vendor-managed inventory (VMI). As a result, “company-binding chains” are created (cf. Fig. 1) that extend beyond the company, taking into account “partnership” with selected suppliers and limiting the size of the supplier base. Often, however, especially when the buyer has an advantage over the supplier, this partnership consists of forcing a reduction in material prices, which leads only to the allocation of revenue in the supply chain without visible changes in the impact of such a form of the chain on the competitive capabilities of enterprises.
The article comes from the magazine “Logistyka” 3/2004.