Introduction

Supply chain networks have gained prominence in the last decade. Important reasons for their growing importance include: global dispersion of manufacturing and distribution facilities; demand for customized products for local markets; competitive pressures; and rapid advances in information technologies in the form of EDI, internet technologies, electronic commerce, etc. [#!nvbook!#].

A supply chain is a network of supplier, manufacturing, assembly, distribution, and logistics facilities that perform the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.

  

Figure: A typical supply chain network

Traditionally marketing, distribution, planning, manufacturing, and the purchasing departments of various organizations operated independently. These functional departments have their own objectives which are often conflicting. For example, marketing department's objective of high customer service levels and maximum revenue conflict with manufacturing and distribution goals like reduction of finished goods inventories. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. There is a critical need for a mechanism through which the different functions can be integrated. Enabling effective integration of the various functional entities is the primary objective of supply chain management.

Figure shows the elements present in a simple typical supply chain network. The suppliers (of raw materials, components, and sub-assemblies), manufacturing/assembly plants, warehouses (central, local, etc.), distributors, retailers, and customers make up the important players in a supply chain. The logistics function is also a key element for effective functioning of a supply chain. Logistics elements are required for agile delivery of raw material/components/sub-assemblies to the plants (supply logistics); and for rapid delivery of finished products to the customers (distribution logistics). A realistic supply chain may have multiple end products with shared components, facilities, and capacities.