LO-1 explain the strategic importance of the

supply chain 
The supply chain’s strategic importance 

Because an increasing percentage of an organization’s costs are determined by purchasing,

relationships with suppliers are increasingly integrated and long term 

Join efforts that improve innovation, speed design, and reduce cost are common 

Supply chain management is the integration of the activities that procure materials and
services, transform them into intermediate goods and final products, and deliver them to
customers 

These activities include purchasing and outsourcing activities, plus many other functions that
are important to the relationship with suppliers and distributors 

Supply chain management includes determining 1. Transportation vendors, 2. credit and cash
transfers, 3. suppliers, 4. distributors, 5. accounts payable and receivable, 6. warehousing and
inventory, 7. order fulfillment and 8. Sharing customer, forecasting and production
information 

The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate
customer 

Effective supply chain management makes suppliers “partners” in the firm’s strategy to
satisfy an ever-chaining marketplace 

A competitive advantage may depend on a close long-term strategic relationship with a few
suppliers 

Strategies of low cost or rapid response demand different things from a supply chain than a
strategy of differentiation 

Such suppliers should have the ability to design low-cost products that meet the functional
requirements, minimize inventory, and drive down lead times 

Each organization has its mandate and constituents 

Firms must achieve integration of strategy up and down the supply chain and must expect
that strategy to be different for different products and to change as products move through
their life cycle