Supply Chain Management Theory

2. Theoretical Background

The Theoretical Background provides the author an overview of different theories and concepts from study areas such as Business administration, Supply chain Management, Supply Relation Management, Purchasing, Information technology etc. This chapter intends to serve as the basis for the analysis of the Research Methodology.

In this chapter, it is discussed the

2.1. 1 Supply Chain Management

The phenomenon of Supply Chain Management has created a new economic environment in which organizations compete in the market no longer as a single legal entity, but as supply chains. Macbeth and Ferguson stated that “the basic concept of supply chains extends the world-class manufacturing models across the former organizational

In this scenario, the Supply Chain Management theory has been established to deal with new challenges. One of the main purposes of Supply Chain Management is to integrate the businesses processes through the value chain within and across company’s boarders.

However, due to high costs of building up and maintaining strategic partnerships with the suppliers, company tries to allocate their resources in a best possible way through their supply chain. The motive behind building up the close relationships with a small number of key suppliers, which hold high technological and add-value know –how and resources to maintain strong relationships with the others.

Indeed, the topic of buyer-supplier relationship is relatively new in business economics. The buyer-Supplier relationship has become one of the most studied subjects of the management theory, in which the procurement function, as one of its enablers in companies, stays in the middle point of these

It has been stated that the development to introduce an ERP system in to an organization is a challenging process because of the involvement of different critical operations such as ERP software selection and configuration.

Lonzinsky stated the following general objectives that every organization seeks to accomplish by installing ERP software:-

1. To reduce the cost and size of the Company’s Information technology sector.

2. It offers technology which can support different functions in the organization such as Account, Finance, Administrative functions as well as build the management reports to maintain processes of control and business management.

3. Create a master Base to support growth with less proportional internal maintenance costs.

4. To avoid duplication, ensure synergy and manage performance indicators, it should achieve a better balance between control and decentralization