The new millennium features increasing numbers of word-class competitors, domestically and internationally, that are forcing organizations to improve their internal processes in order to stay competitive. Sophisticated customers, both industrial and consumer ,no longer talk about price increases-they demand price reductions .Information available over the Internet has shifted the balance of power between buyers and sellers. An abundance of competitors and choices has conditioned customers to want higher quality, faster delivery, and products and services tailored to their individual needs at a lower total cost. If a company cannot meet these requirements, the customer will find a source that is more accommodating.
Throughout the 1960s and 1970s, companies began to develop detailed market strategies that focused on creating and capturing customer loyalty. Before long, organizations also realized that market requirements demanded the support of strong engineering, design, and manufacturing functions. Design engineers had to translate customer requirements into product and service specifications, which then had to be produced at a high level of quality at a reasonable cost. As the demand for new products increased throughout the 1980s, organizations had to become flexible and responsive to modify existing products, services and processes, or to develop new ones to meet ever-changing customer needs.
As organizational capabilities improved further in the 1990s, managers began to realize that material and service inputs from suppliers had a major impact on their ability to meet customer needs. This led to an increased focus on the supply base and the responsibilities of purchasing. Managers also realized that producing a quality product was not enough. Getting the right products and services to customers at the right time, cost, place, condition, and quantity constituted an entirely new type of challenge. More recently, a whole new set of time-reducing information technologies and logistics networks has evolved to meet these challenges.
As a result of these changes, organizations now find they must be involved in the management of (or at least take a serious interest in) the suppliers that provide materials and service. They must also be concerned with the network of downstream firms responsible for delivery and after-market service of the product to the end customer. From this realization emerged the concepts of the supply chain management.
Several factors are driving an emphasis on supply chain management. First, the cost and availability of information resources between entities in the supply chain allow easy linkages that eliminate time delays in the network. Second, the level of competition in both domestic and international markets requires organizations to be fast, agile, and flexible. Third, customer expectations and their suppliers must be responsive or face the prospect of losing market share. Competition today is no longer between individual firms. The companies that configure the best supply chains will be the market winners.