The supply chain can be described as the network, covering the various stages in the provision of products or services to customers (Monks, 1996). It includes not only manufacturers and suppliers, but also transporters, warehouses, distributors, retailers, etc. The number of stages in the supply chain depends on the customers’ needs, and the role each stage plays in fulfilling their needs. Supply Chain Management (SCM) integrates procurement, operations and logistics to provide value added products or services to customers. Effective management of the supply chain helps organizations meet customer requirements on time, with the desired quality specifications, in a cost-effective manner, through the coordination of different activities which transform raw materials into final products or services ((ICMR), Operations Management, 2003).
Supply Chain Management can provide both tangible and intangible benefits to an organization. Tangible benefits include revenue growth, improved facility utilization, optimized inventory management, etc. Intangible benefits include improvement in quality, improvement in customer satisfaction, and enhanced customer and supplier techniques (Dilworth, 1992).
Supply Chain Management has become on of the key areas that organizations are focusing on to reduce costs and improve the efficiency of the production process (Chopra, 1992). Four key drivers of supply chain performance are inventory, transportation, facilities and information. They help determine not only the responsiveness and effectiveness, but also the strategic fit of the supply chain.
Inventory – Inventory includes raw materials, work-in-progress, and finished goods in the supply chain. Inventory exists in organizations due to a mismatch between demand and supply. Inventory is also maintained to increase the responsiveness of organizations to sudden increases in customer demand.
Transportation – Organizations use transportation to move components and products between the different stages of the supply chain. Transportation decisions are made on the mode of transportation and route to use in the transfer of products from one point to another.
Facilities – Facilities are the locations in the supply chain where the raw materials and finished goods are stored, and where work-in-progress materials are assembled or fabricated, and from which finished goods are distributed. Facility’s capacity and location has significant affect on the performance of the supply chain.
Information – Sometimes, the value of information as a supply chain driver is undermined due to its abstract quality. However, in reality, it is one of the key drivers affecting the performance of the supply chain. As the supply chain is made up of various entities, proper coordination is the key to improving the efficiency of the supply chain system. The flow of information also affects the performance of other drivers. With proper information, organizations can predict the quantity to produce, when it is needed and where it is needed. This makes the supply chain more effective and responsive to market demand.