What do we really mean by supply chain management?
In this brief excerpt from his book, Future Logistics Challenges , Leif Enarsson of Sweden's Gothenburg University wonders why after all these years we still haven't arrived at a common definition of supply chain management.
Over the years many buzzwords have emerged in the field of logistics, with "supply chain management" (SCM) and all its variants being the most common examples. There is nothing new in these terms. Logistics management is still a developing discipline, and natural development over time does not equate to truly new concepts.
Nevertheless, researchers continue to discuss and debate the meaning of the term supply chain management. Every new book about logistics, it seems, contains another definition of SCM. To me this is an absurd situation, because there is nothing truly new, even if we do give it a new name or definition.
According to the academics Lambert and Stock1 and others, the definition of supply chain management is much broader than that of logistics. This is a common argument. For example, the Council of Logistics Management (CLM) (now the Council of Supply Chain Management Professionals) revised the definition of logistics in 1998:
Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the pointof- consumption in order to meet customers' requirements.
Lambert, Cooper, and Pagh offered the following definition that same year2:
Supply chain management is the integration of key business processes from end user through original suppliers that provide products, services, and information that add value for customers and other stakeholders.
That definition covers most business activities. Christopher's definition3 is more customer-focused:
The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.
The standpoint that logistics management is more internal than supply chain management strikes me as somewhat strange given that integration between different players has always been fundamental to logistics management.
To illustrate how the definition and concept of supply chain management have multiplied, consider that in 1999, 30 papers were presented at a conference, resulting in at least 20 different variations on the SCM theme.4 These included:
Supply chain network
Supply management
Capacity-based supply chain
Supply chain dynamics
Networkwide supply chain
Lean supply chain
Supply network
Web supply chain
Supply demand
Seamless supply chain
Supply integration
Demand chain
Information management
Supply coalitions
Similarly Day, Burnett, and Forrester5 found that the term "supply chain management" was frequently used but the concept had inherited a multiplicity of meanings—in other words, there were disagreements about what definition best describes SCM. They also found that literature surveys create more confusion than general agreement on a definition.
Here are some examples of how fragmented the definitions have been. Olsen and Ellram's definition6 had a broad discussion about the "buyer-supplier relationship." New7 argued that supply chain management crosses boundaries between operations and industrial economics, marketing, economic geography, and industrial sociology. (Under that description, supply chain management includes nearly everything in business—hardly a meaningful definition.)
Another definition was that of Mattsson,8 who said the supply chain consisted of a line of actors who are in a dependent relationship with one other, and through which material, payment, and information flow. But this could also be seen as a traditional defi- nition of logistics.
SCM is what you make of it
All of these variations and the lack of clarity in the definition lead to the conclusion that SCM is what you make of it; in other words, it can involve anything, depending on the situation. In that view, it is hardly a new theory, nor is it a new scientific field.
Leaving aside the discussion of the proper definition of SCM and its relationship to logistics for a moment, let's look more closely at the concept itself and its possible advantages. The supply chain concept extends to include a focus on production and involves both the supply and distribution sides of the company. As the chain expands, the distance between the manufacturer and the end consumer increases, both geographically and from an operational point of view. At the same time, there is a strong trend toward more and more customer-oriented products and production, which requires close relationships between suppliers and customers.
This trend points out the need for a form of supply chain or, more generally, a system for integration and closer relationships. But is the "supply chain" concept the solution to this challenge? A chain of companies is only a part of a whole, complex system. There has to be a focus on all of the relationships and the dependencies, which is a big challenge indeed.
Currently, SCM research is dominated by information technology (IT)-related projects that often involve IT-based modeling and simulation. As a result, SCM consultants and researchers are building models in one limited field, often without a deeper knowledge of established theory, practical usefulness, economic benefits, or the effects of their developments on the system as a whole.
In today's world, businesses are shaped by complexity, fast-changing conditions, and constant development. This causes instability in many respects, but is this situation really new? Have not people in all periods of history thought that their own times were more dynamic and more changeable than any before them? Today, however, we can better predict change than we could in the past. This means that we can control development and that the rate of development is low today compared to previous periods.
Companies are trying to respond to dynamic developments and complexity, striving to achieve stability and to carry out operations more efficiently. The goal of IT development, to a great extent, is to create a better (which often means simpler and easier) way to conduct business.
In this dynamic world, we create new theories and new concepts such as supply chain management. What are the criteria for the new theories, and how are new conceptions related to them? Sometimes it seems that the degree of popularity—how often it is used, mentioned, or referred to—is the determining factor.
What kind of chain?
If we want to keep the "chain" concept, then the most appropriate name might be "value chain." But in some respects, it would be more correct to call the supply chain the "demand chain." One important reason is that demands for more effective support often come from customers. A discussion about supply and demand, moreover, leads to the conclusion that all actors in the supply chain can be seen both as customers and suppliers, depending on the position from which you view the chain. Regardless of the viewpoint, the end of the chain is always the final customer.
If we treat the supply chain as a theory, we can compare it with other theories and draw some conclusions. For instance, the marketing channel theory focuses on the distribution and demand side of a company; it can be argued that this is only part of the chain, but this depends on where the company is situated in the chain. The value chain primarily focuses on internal activities and physical flows, so that support activities are related to external activities. In comparison with supply chains, the value chain pays very little attention to information systems. The network theory considers the whole network, its actors, activities, and relationships. The supply chain is only one part of a network, and therefore it only gives us one part of the entirety. Finally, the business logistics theory includes the whole material flow and the different activities within it. Business logistics does not focus on integration and the information system in the same way that the supply chain concept does. In logistics, information systems are natural and necessary tools for managing the flow in all its aspects; it is not the major management focus that it is in the supply chain theory.
It is quite possible to compare and find differences between the supply chain concept and established concepts. Yet isn't the supply chain concept a result of striving for new ideas—ideas that contain very little in the way of substantial new facts? In fact, we could just as well call supply chain management "cash flow management" or "information management."
It should be obvious to anyone that I have a reserved attitude towards new concepts, and in my logistics research world, I believe that this is a healthy approach.
Endnotes: 1. Douglas M. Lambert and James R. Stock, Fundamentals of Logistics Management (New York: McGraw-Hill, 1993).
2. Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, "Supply Chain Management: Implementation Issues and Research Opportunities." The International Journal of Logistics and Management (1998).
3. Martin Christopher, Logistics and Supply Chain Management. (London: Prentice Hall, 1998)
4. Leif Enarsson, "Supply Chain Management: Just a Simple System, or a Determining Solution?" Paper given at the 15th International Conference on Production Research, University of Limerick, Ireland (1999).
5. Marc Day, John Burnett, and Paul Forrester, "Assessing Control Sspects in U.K. Ceramic Tableware Supply Chain." Paper presented at the 15th International Conference on Production Research, University of Limerick, Ireland (1999).
6. Rasmus F. Olsen and Lisa M. Ellram, "Buyer-Supplier Relationships: Alternative Research Approaches," European Journal of Purchasing & Supply Management (1997).
7. Steve New, "Supply Chains: Some Doubts." Paper presented at the International Purchasing and Supply Education and Research Association, Cardiff, United Kingdom (1994).
8. Stig-Arne Mattsson, "Effective Material Flow in Supply Chains Through Integration." Paper presented at the Federation of European Production and Industrial Management Societies (FEPIMS) Conference, Helsinki, Finland (1998).
Editor's Note: This article is an edited excerpt from Future Logistics Challenges, (ISBN 9788763001700). The book can be purchased for UK £36, US $64, or EUR 53. For more information, go to International Specialized Book Services (www.isbs.com) or visit the Copenhagen Business School Press web site, www.cbspress.dk. Reprinted by permission of the publisher.
Companies in every sector are converting assets from fossil fuel to electric power in their push to reach net-zero energy targets and to reduce costs along the way, but to truly accelerate those efforts, they also need to improve electric energy efficiency, according to a study from technology consulting firm ABI Research.
In fact, boosting that efficiency could contribute fully 25% of the emissions reductions needed to reach net zero. And the pursuit of that goal will drive aggregated global investments in energy efficiency technologies to grow from $106 Billion in 2024 to $153 Billion in 2030, ABI said today in a report titled “The Role of Energy Efficiency in Reaching Net Zero Targets for Enterprises and Industries.”
ABI’s report divided the range of energy-efficiency-enhancing technologies and equipment into three industrial categories:
Commercial Buildings – Network Lighting Control (NLC) and occupancy sensing for automated lighting and heating; Artificial Intelligence (AI)-based energy management; heat-pumps and energy-efficient HVAC equipment; insulation technologies
Manufacturing Plants – Energy digital twins, factory automation, manufacturing process design and optimization software (PLM, MES, simulation); Electric Arc Furnaces (EAFs); energy efficient electric motors (compressors, fans, pumps)
“Both the International Energy Agency (IEA) and the United Nations Climate Change Conference (COP) continue to insist on the importance of energy efficiency,” Dominique Bonte, VP of End Markets and Verticals at ABI Research, said in a release. “At COP 29 in Dubai, it was agreed to commit to collectively double the global average annual rate of energy efficiency improvements from around 2% to over 4% every year until 2030, following recommendations from the IEA. This complements the EU’s Energy Efficiency First (EE1) Framework and the U.S. 2022 Inflation Reduction Act in which US$86 billion was earmarked for energy efficiency actions.”
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
"After several years of mitigating inflation, disruption, supply shocks, conflicts, and uncertainty, we are currently in a relative period of calm," John Paitek, vice president, GEP, said in a release. "But it is very much the calm before the coming storm. This report provides procurement and supply chain leaders with a prescriptive guide to weathering the gale force headwinds of protectionism, tariffs, trade wars, regulatory pressures, uncertainty, and the AI revolution that we will face in 2025."
A report from the company released today offers predictions and strategies for the upcoming year, organized into six major predictions in GEP’s “Outlook 2025: Procurement & Supply Chain.”
Advanced AI agents will play a key role in demand forecasting, risk monitoring, and supply chain optimization, shifting procurement's mandate from tactical to strategic. Companies should invest in the technology now to to streamline processes and enhance decision-making.
Expanded value metrics will drive decisions, as success will be measured by resilience, sustainability, and compliance… not just cost efficiency. Companies should communicate value beyond cost savings to stakeholders, and develop new KPIs.
Increasing regulatory demands will necessitate heightened supply chain transparency and accountability. So companies should strengthen supplier audits, adopt ESG tracking tools, and integrate compliance into strategic procurement decisions.
Widening tariffs and trade restrictions will force companies to reassess total cost of ownership (TCO) metrics to include geopolitical and environmental risks, as nearshoring and friendshoring attempt to balance resilience with cost.
Rising energy costs and regulatory demands will accelerate the shift to sustainable operations, pushing companies to invest in renewable energy and redesign supply chains to align with ESG commitments.
New tariffs could drive prices higher, just as inflation has come under control and interest rates are returning to near-zero levels. That means companies must continue to secure cost savings as their primary responsibility.
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
Freight transportation providers and maritime port operators are bracing for rough business impacts if the incoming Trump Administration follows through on its pledge to impose a 25% tariff on Mexico and Canada and an additional 10% tariff on China, analysts say.
Industry contacts say they fear that such heavy fees could prompt importers to “pull forward” a massive surge of goods before the new administration is seated on January 20, and then quickly cut back again once the hefty new fees are instituted, according to a report from TD Cowen.
As a measure of the potential economic impact of that uncertain scenario, transport company stocks were mostly trading down yesterday following Donald Trump’s social media post on Monday night announcing the proposed new policy, TD Cowen said in a note to investors.
But an alternative impact of the tariff jump could be that it doesn’t happen at all, but is merely a threat intended to force other nations to the table to strike new deals on trade, immigration, or drug smuggling. “Trump is perfectly comfortable being a policy paradox and pushing competing policies (and people); this ‘chaos premium’ only increases his leverage in negotiations,” the firm said.
However, if that truly is the new administration’s strategy, it could backfire by sparking a tit-for-tat trade war that includes retaliatory tariffs by other countries on U.S. exports, other analysts said. “The additional tariffs on China that the incoming US administration plans to impose will add to restrictions on China-made products, driving up their prices and fueling an already-under-way surge in efforts to beat the tariffs by importing products before the inauguration,” Andrei Quinn-Barabanov, Senior Director – Supplier Risk Management solutions at Moody’s, said in a statement. “The Mexico and Canada tariffs may be an invitation to negotiations with the U.S. on immigration and other issues. If implemented, they would also be challenging to maintain, because the two nations can threaten the U.S. with significant retaliation and because of a likely pressure from the American business community that would be greatly affected by the costs and supply chain obstacles resulting from the tariffs.”
New tariffs could also damage sensitive supply chains by triggering unintended consequences, according to a report by Matt Lekstutis, Director at Efficio, a global procurement and supply chain procurement consultancy. “While ultimate tariff policy will likely be implemented to achieve specific US re-industrialization and other political objectives, the responses of various nations, companies and trading partners is not easily predicted and companies that even have little or no exposure to Mexico, China or Canada could be impacted. New tariffs may disrupt supply chains dependent on just in time deliveries as they adjust to new trade flows. This could affect all industries dependent on distribution and logistics providers and result in supply shortages,” Lekstutis said.