Supply Chain Management For Dummies. Daniel Stanton

the book so that you can start reading anywhere that catches your eye and then hunt for additional bits that sound interesting.

If your goal is to discover what supply chain management is, start with Part 1. If you’re trying to get a sense for how the pieces of a supply chain fit together in a framework, read about the Supply Chain Operations Reference (SCOR) Model in Part 2. If you need to get a handle on the technologies that are key to supply chain management, check out Part 3. If you’re looking for ways to drive strategic value for your company by using supply chain management tools, jump into Part 4. Finally, Part 5 is packed with information that can help you grow your career in supply chain management.

      

Some of the material in this book will be useful if you’re preparing for a supply chain certification such as Certified Supply Chain Professional or SCPro (see Chapter 20), but you shouldn’t use it as a substitute for the official study guides.

      No matter how you go through the book, you’ll eventually want to read all the chapters. Each chapter is useful on its own, but the chapters work together to help you see how interconnected the parts of a supply chain are and why you need to think about all of them when you make decisions that affect your business, your customers, and your suppliers.

      

For some helpful information about how to describe supply chain management, how to lead supply chain projects, and how to use the SCOR Model, check out the Cheat Sheet for this book by visiting https://www.dummies.com and entering the book’s title in the search field.

Part 1

      Getting Started with Supply Chain Management

IN THIS PART …

      Simplify the concept of supply chain management by breaking it into pieces.

      Analyze supply chain management from different perspectives to see why it’s important.

      Align supply chain management with the goals of your business.

      Optimize supply chain performance to drive better results for you, your suppliers, and your customers.

Chapter 1

      The Growing Demand for Supply Chain Management

      IN THIS CHAPTER

      

Understanding complex business challenges

      

Focusing on supply chain tasks

      

Understanding supply chain management principles

      

Getting started with the New Supply Chain Agenda

      These days, it’s hard to find a copy of The Wall Street Journal that doesn’t have the phrase supply chain somewhere on the first page. You hear about supply chains everywhere: in company reports, on the news, and even in casual conversation. But it hasn’t always been that way. Only in the past 35 years has supply chain management gone from being a vague academic concept to a critical business capability. This chapter covers why supply chain management has become so important and explains the process for building best-in-class supply chain management into your company.

Defining Supply Chain Management

In spite of the current hype, supply chains aren’t really that new. Entrepreneurs have been buying things from suppliers and selling products to customers for almost as long as people have inhabited the earth. Supply chain management is new, however. In fact, the basic principles of supply chain management began to take shape in the 1980s, at about the same time that personal computers came onto the business scene. You can see the trend clearly by using Google’s N-Gram Viewer, shown in Figure 1-1, which illustrates how often the term supply chain has been used in book titles.

      FIGURE 1-1: Frequency of supply chain in book titles.

      Supply chain management is the planning and coordination of all the people, processes, and technology involved in creating value for a company. Managing a supply chain effectively involves aligning all the work inside your company with the things that are happening outside your company. In other words, it means looking at your business as a single link in a long, end-to-end chain that supplies something of value to a customer.

      

The word value shows up a lot when people talk about supply chain management. Basically, value means money. If a customer is willing to pay for something, it has value.

      Negotiating prices, scheduling manufacturing, and managing logistics all affect the value equation for a company, and they’re critical to a supply chain, but because they’re so interdependent, it’s a bad idea to manage them separately, in silos. As companies grow larger, supply chains get longer, and the pace of business gets faster, making it more important to align the various functions in a supply chain. Ironically, many of the strategies and metrics that businesses relied on in the past, and that managers have been taught to use, can actually drive the wrong behaviors. A sales rep might hit her quota by landing a huge deal with a customer, for example, but the deal might be unprofitable for the company because of the costs it will drive to the logistics and manufacturing functions. Sales, logistics, manufacturing, procurement, and all your other functions need to be aligned to ensure that the business is pursuing profitable deals.

The difference between the amount of money your company brings in (revenue) and the amount of money it spends (costs) is your profit. In other words, your profit is the amount of value that you have captured from your supply chain.

      On the other hand, companies that do a good job of managing their supply chain are better able to take advantage of value-creation opportunities that their competitors might miss. By implementing lean manufacturing, for example, companies can reduce inventories. By being responsive to customer needs, they can build stronger relationships with their customers and grow their sales. By collaborating closely with their suppliers, they can get access to the materials they need, when they need them, and at a reasonable cost.

      

Part 4 of this book is all about ways you can use supply chain management to create more value.

      Keeping all the parts of the supply chain aligned is key to ensuring that