In recent years, the concept of Supply Chain Management (SCM), introduced to address
the integration of organizational functions ranging from the ordering and receipt
of raw materials throughout the manufacturing processes to the distribution and
delivery of products to customers with a view to enabling organizations to achieve
higher quality in products and customer services with reduced inventory cost, has
attracted considerable managerial attention because of its huge potential competitive
impact (Stevens, 1989). Originally used in the logistics literature to describe
a new integrated logistics management approach across different business functions,
such as purchasing, manufacturing, distribution, and sales (Houlihan, 1985), the
SCM concerns with issues and characteristic features of several interrelated factors
and activities of an organization, such as demand forecasting, procurement, manufacturing,
distribution, inventory, transportation and customer service, and the resulting
integrated approach is extended to customers and suppliers (Christopher, 1992).
Thus the SCM tends to be utilized in a wider sense, and encompasses several Supply
Chain (SC) processes not necessarily related to logistics.
The problem in the design of a SC network is to quantify and optimize the tradeoff
between customer service levels and inventory investment required to support the
service requirements. The problem becomes more challenging because of the dynamic
nature of the SC: prolific product variety, short lifetime products, frequent new
product introduction, non-stationary customer demand, and frequently changing service-level
requirements. In turn, the performance of SCs must be continuously evaluated and
the inventory-service level tradeoff has to be optimized. A number of research issues
in SCM have thus become critical in the context of prevailing industrial scene (Davis,
1993).
In today’s global market place, individual firms no longer compete as independent
entities with brand names, but work as a part of an integrated SC. As such, the
ultimate success of the firm depends on its managerial ability to integrate and
coordinate the intricate network of business relationships among SC partners (Lambert
and Cooper, 2000). A firm, be it manufacturing or service, belongs to at least one
SC. How widely or narrowly the chain is managed is an indicator of the extent to
which SCM is being practiced. On the one hand, SCs can be managed as a single entity
through a dominant member, referred to as the ‘predator’ (Towill, 1997), and on
the other, through a system of partnerships requiring well-developed cooperation
and coordination. In this context, analysis of the impact of an integrated SC in
business performance has assumed significance because of the emergence of information-empowered
customers, demanding greater responsiveness, and existence of competitive global
rivals imposing increased cost and reduced profit (Mentzer, 2001).
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