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Chapter 11 • Supply Chain Management 305

multiple channels in the business, which provides accurate information to everyone in the
network. SCM provides companies like Cisco the flexibility and the agility to be in constant
control of their businesses. It improves efficiencies and reduces costs substantially while also
giving companies the adaptability to modify their business processes.
As the opening Cisco case showed, there are myriad parties and processes involved in the
SCM. Availability of proper communication channels, good collaboration policies, continuous
innovation, and seamless integration across the systems involved are necessary components for reap-
ing benefits. Cisco’s e-SCM strategy benefits include supplier base reduction, greater involvement of
supplier management in new product introduction, and increased risk management strategies. In
addition, it has also led to refinement of Cisco’s outsourcing strategy so it could better leverage its
business with electronics manufacturing services (EMS) providers and better use their capabilities.

SUPPLY CHAIN MANAGEMENT
Supply chain is the network of services, material, and information flow that link a firm’s customer
relations, order fulfillment, and supplier relations processes to those of its suppliers and customers.
In practice, people tend to use the terms value chain and supply chain interchangeably. Supply chain
management is the science of developing a strategy to organize, control, and motivate the resources
1
involved in the flow of services and materials within the supply chain. According to the Council
of Supply Chain Management Professionals (CSCMP), a professional association that developed a
definition in 2004, supply chain management “encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across companies.”
2
SCM is an outgrowth of the value chain concept developed by Michael Porter. A business
value chain, according to Porter, consists of a series of processes or activities conducted by the com-
pany to add value to the existing product or service and to provide a competitive advantage in the
market. These business processes can be grouped into primary or secondary activities depending on
the company’s business strategy, product, or service and relationships with its business partners.
Supply chain focus is on improving the efficiencies of the primary activities with a better flow of
information across the activities and linking the with the company’s external partners and customers.
Supply chain, therefore, improves the value chain of the firm. It has a direct impact on the
company’s bottom line. To achieve competitive advantage, companies today first need to under-
stand their supply chain and build the strategy in such a fashion that its competitive strategy and
supply chain strategy are properly aligned. The company can otherwise fail miserably in the
market, even when its product or service is of good value. For example, Toys “R” Us, Inc., failed
miserably when it first entered the e-commerce market in 1998. Their Web site got enormous
attention from the end users during the Christmas season in 1998, and thousands of users placed
online orders for toys to be delivered as gifts before December 25. At the time Toys “R” Us did
not have a proper supply chain system in place to fulfill the number of orders it received; hence,
it was not able to deliver the toys on time before Christmas Day. This became a major embarrassment

1 Krajewski, L., Ritzman, L., and Malhotra, M. (2006). Operation Management Processes and Value Chains, 8th ed.
Publisher: Prentice Hall, p. 371.
2 Porter, M., and Millar, V. (1985). How Information Gives You Competitive Advantage. Harvard Business Review, 63 (4),
149 (12 pages).