Fundamentals of Supply Chain Theory, 2nd Edition

Chapter 1 Introduction

1.1 The Evolution of Supply Chain Theory

The field of supply chain management arose from managers' recognition that buying, selling, manufacturing, assembling, warehousing, transporting, and delivering goods—that is, the activities of a supply chain—are expensive endeavors, and that careful attention to how these activities are carried out may reduce their cost. Supply chains used to be viewed, at least by some managers, as “necessary evils.” As a result, the mindset for supply chain managers revolved around reducing costs, by reducing inventory levels, taking advantage of economies of scale in shipping, optimizing network designs, reducing volatility in demands, and so on. By and large, these improvements were invisible to companies' customers, provided that they did not result in longer lead times, more frequent stockouts, or other degraded service.

By the end of the last century, however, the purpose of the supply chain had begun to change as some firms discovered that supply chains could be a source of competitive advantage, rather than simply a cost driver. For example, Dell demonstrated that, through excellent supply chain management, it could deliver computers—fully customized to the buyer's specifications—just a few days after they were ordered. In doing so, it shattered the existing paradigm for computer purchases, in which consumers could choose from only a limited number of preconfigured options. Similarly, Walmart showed that, by operating ...