Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

1.1.7 Supply Chain, Extended Enterprise, and Supply Chain Management

Intended learning outcomes: Describe the reasons for logistics networks, production networks, procurement networks, distribution networks, and service networks. Produce an overview on the supply chain, the extended enterprise and supply chain management.

For products of a certain complexity, design and manufacturing are often distributed among several companies or among different organizational units within a company. From the perspective of the individual manufacturer, the reasons for this are, for example:

  • Quality: Some technologies or processes may not be mastered successfully enough (pro­blem of effectiveness, that is, achieving the given or expected quality standard).
  • Costs: Certain technologies or processes cannot be implemented economically (problem of efficiency, that is, the actual output com­pared with the output expected, with regard to the use of means).
  • Delivery: Some processes are not rapid enough, or they are unstable over time.
  • Flexibility: Customer demand may show rapid variation; the company’s own competencies or capacity cannot be adapted quickly enough.

A logistics network is the joining of the logistics of several organizational units, that is, companies or parts of companies, to form comprehensive logistics.
Production network, or production system, and procurement network can be used as synonyms of logistics network.

The end user of a logistics network is the consumer.

Figure shows an example where three organizational units form a logistics network. Here it is a logistics chain.

Fig.        Three organizational units in a logistics chain.

The logistics chain between two stores is crucial. The logistics of the second organi­zatio­nal unit in Figure must not be viewed in isola­tion. The logistics of the first organizational unit and the logistics of the third organizational unit will have a direct influence on the logistics of the second organizational unit, since there is no buffer between the two stores.

From the perspective of the end user, distribution and service networks also belong to value-added, for only with delivery and possibly service is the customer order fulfilled.

A distribution network, or distribution system, is a group of interrelated facilities — manufacturing and one or more levels of warehousing — linking the production, storage, and consumption activities for spare parts and finished goods inventory [ASCM22].

A service network is a group of interrelated facilities for performing all services in connection with material or nonmaterial goods.

This leads to the following general terms used for all the types of networks mentioned above (i.e. in the previous subsection):

A supply chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical goods, and cash [ASCM22]. A comprehensive defini­tion of supply chain also includes the networks for disposal and recycling.

The extended enterprise is the notion that supply chain partners form a larger entity. These partners form the supply chain community (cf. [ASCM22]).

Supply chain management (SCM) is the design, planning, execution, con­trol, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging world­wide logistics, synchronizing supply with demand, and measuring perfor­mance globally ([ASCM22]).

Course section 1.1: Subsections and their intended learning outcomes