A descriptive statistic (in the count noun sense) is a summary

statistic that quantitatively describes or summarizes features from a

collection of information,[1] while descriptive statistics (in
the mass noun sense) is the process of using and analysing those
statistics. Descriptive statistics is distinguished from inferential
statistics (or inductive statistics) by its aim to summarize a sample,
rather than use the data to learn about the population that the
sample of data is thought to represent.[2] This generally means that
descriptive statistics, unlike inferential statistics, is not developed on
the basis of probability theory, and are frequently nonparametric
statistics.[3] Even when a data analysis draws its main conclusions
using inferential statistics, descriptive statistics are generally also
presented.[4] For example, in papers reporting on human subjects,
typically a table is included giving the overall sample size, sample
sizes in important subgroups (e.g., for each treatment or exposure
group), and demographic or clinical characteristics such as
the average age, the proportion of subjects of each sex, the
proportion of subjects with related co-morbidities, etc.
Some measures that are commonly used to describe a data set are
measures of central tendency and measures of variability
or dispersion. Measures of central tendency include
the mean, median and mode, while measures of variability include
the standard deviation (or variance), the minimum and maximum
values of the variables, kurtosis and skewness.[5]

Use in statistical analysis

Descriptive statistics provide simple summaries about the sample
and about the observations that have been made. Such summaries
may be either quantitative, i.e. summary statistics, or visual, i.e.
simple-to-understand graphs. These summaries may either form the
basis of the initial description of the data as part of a more
extensive statistical analysis, or they may be sufficient in and of
themselves for a particular investigation.
For example, the shooting percentage in basketball is a descriptive
statistic that summarizes the performance of a player or a team.
This number is the number of shots made divided by the number of
shots taken. For example, a player who shoots 33% is making
approximately one shot in every three. The percentage summarizes
or describes multiple discrete events. Consider also the grade point
 average. This single number describes the general performance of a
student across the range of their course experiences. [6]
The use of descriptive and summary statistics has an extensive
history and, indeed, the simple tabulation of populations and of
economic data was the first way the topic of statistics appeared.
More recently, a collection of summarisation techniques has been
formulated under the heading of exploratory data analysis: an
example of such a technique is the box plot.
In the business world, descriptive statistics provides a useful
summary of many types of data. For example, investors and brokers
may use a historical account of return behaviour by performing
empirical and analytical analyses on their investments in order to
make better investing decisions in the future.
Univariate analysis
Univariate analysis involves describing the distribution of a single
variable, including its central tendency (including the mean, median,
and mode) and dispersion (including the range and quartiles of the
data-set, and measures of spread such as the variance and standard
deviation). The shape of the distribution may also be described via
indices such as skewness and kurtosis. Characteristics of a
variable's distribution may also be depicted in graphical or tabular
format, including histograms and stem-and-leaf display.
Bivariate and multivariate analysis
When a sample consists of more than one variable, descriptive
statistics may be used to describe the relationship between pairs of
variables. In this case, descriptive statistics include:
 Cross-tabulations and contingency tables
 Graphical representation via scatterplots
 Quantitative measures of dependence
 Descriptions of conditional distributions
The main reason for differentiating univariate and bivariate analysis
is that bivariate analysis is not only a simple descriptive analysis,
but also it describes the relationship between two different
variables.[7] Quantitative measures of dependence include
correlation (such as Pearson's r when both variables are continuous,
or Spearman's rho if one or both are not) and covariance (which
reflects the scale variables are measured on). The slope, in
regression analysis, also reflects the relationship between variables.
The unstandardised slope indicates the unit change in the criterion
 variable for a one unit change in the predictor. The standardised
slope indicates this change in standardised (z-score) units. Highly
skewed data are often transformed by taking logarithms. The use of
logarithms makes graphs more symmetrical and look more similar
to the normal distribution, making them easier to interpret
intuitively.[8]: 47

References
External links
 Descriptive Statistics Lecture: University of Pittsburgh
Supercourse: http://www.pitt.edu/~super1/lecture/lec0421/index.ht
m

Quantitative analysis (finance)

Quantitative analysis is the use of mathematical and statistical
methods in finance and investment management. Those working in
the field are quantitative analysts (quants). Quants tend to
specialize in specific areas which may include derivative structuring
or pricing, risk management, investment management and other
related finance occupations. The occupation is similar to those
in industrial mathematics in other industries.[1] The process usually
consists of searching vast databases for patterns, such as
correlations among liquid assets or price-movement patterns (trend
following or reversion).
Although the original quantitative analysts were "sell side quants"
from market maker firms, concerned with derivatives pricing and
risk management, the meaning of the term has expanded over time
to include those individuals involved in almost any application of
mathematical finance, including the buy side.[2] Applied quantitative
analysis is commonly associated with quantitative investment
management which includes a variety of methods such
as statistical arbitrage, algorithmic trading and electronic trading.
Some of the larger investment managers using quantitative analysis
include Renaissance Technologies, D. E. Shaw & Co., and AQR
Capital Management.[3]
History
Further information: Mathematical finance § Derivatives pricing: the
Q world, Financial economics § Derivative pricing, and § Seminal
publications
Quantitative finance started in 1900 with Louis Bachelier's
doctoral thesis "Theory of Speculation", which provided a model to
price options under a normal distribution. Jules Regnault had posited
already in 1863 that stock prices can be modelled as a random walk,
suggesting "in a more literary form, the conceptual setting for the
application of probability to stockmarket operations". [4] It was,
however, only in the years 1960-1970 that the "merit of [these] was
recognized" [4] as options pricing theory was developed.
Harry Markowitz's 1952 doctoral thesis "Portfolio Selection" and its
published version was one of the first efforts in economics journals
to formally adapt mathematical concepts to finance (mathematics
was until then confined to specialized economics journals).
[5]
Markowitz formalized a notion of mean return and covariances for
common stocks which allowed him to quantify the concept of
"diversification" in a market. He showed how to compute the mean
return and variance for a given portfolio and argued that investors
should hold only those portfolios whose variance is minimal among
all portfolios with a given mean return. Thus, although the language
of finance now involves Itô calculus, management of risk in a
quantifiable manner underlies much of the modern theory.
Modern quantitative investment management was first introduced
from the research of Edward Thorp, a mathematics professor at New
Mexico State University (1961–1965) and University of California,
Irvine (1965–1977).[6] Considered the "Father of Quantitative
Investing",[6] Thorp sought to predict and simulate blackjack, a card-
game he played in Las Vegas casinos.[7] He was able to create a
system, known broadly as card counting, which used probability
theory and statistical analysis to successfully win blackjack games.
[7]
His research was subsequently used during the 1980s and 1990s
by investment management firms seeking to generate systematic
and consistent returns in the U.S. stock market. [7] The field has
grown to incorporate numerous approaches and techniques;
see Outline of finance § Quantitative investing, Post-modern
portfolio theory, Financial economics § Portfolio theory.
In 1965, Paul Samuelson introduced stochastic calculus into the
study of finance.[8][9] In 1969, Robert Merton promoted continuous
stochastic calculus and continuous-time processes. Merton was
motivated by the desire to understand how prices are set in financial
markets, which is the classical economics question of "equilibrium",
and in later papers he used the machinery of stochastic calculus to
begin investigation of this issue. At the same time as Merton's work
and with Merton's assistance, Fischer Black and Myron
Scholes developed the Black–Scholes model, which was awarded the
1997 Nobel Memorial Prize in Economic Sciences. It provided a
solution for a practical problem, that of finding a fair price for
a European call option, i.e., the right to buy one share of a given
stock at a specified price and time. Such options are frequently
purchased by investors as a risk-hedging device.
In 1981, Harrison and Pliska used the general theory of continuous-
time stochastic processes to put the Black–Scholes model on a solid
theoretical basis, and showed how to price numerous other
derivative securities, laying the groundwork for the development of
the fundamental theorem of asset pricing.[10] The various short-rate
models (beginning with Vasicek in 1977), and the more general HJM
Framework (1987), relatedly allowed for an extension to fixed
income and interest rate derivatives. Similarly, and in parallel,
models were developed for various other underpinnings and
applications, including credit derivatives, exotic derivatives, real
options, and employee stock options. Quants are thus involved in
pricing and hedging a wide range of securities – asset-
backed, government, and corporate – additional to classic
derivatives; see contingent claim analysis. Emanuel Derman's 2004
book My Life as a Quant helped to both make the role of a
quantitative analyst better known outside of finance, and to
popularize the abbreviation "quant" for a quantitative analyst. [11]
After the 2008 financial crisis, considerations regarding counterparty
credit risk were incorporated into the modelling, previously
performed in an entirely "risk neutral world", entailing three major
developments; see Valuation of options § Post crisis: (i) Option
pricing and hedging inhere the relevant volatility surface - to some
extent, equity-option prices have incorporated the volatility
smile since the 1987 crash - and banks then apply "surface
aware" local- or stochastic volatility models; (ii) The risk neutral
value is adjusted for the impact of counter-party credit risk via
a credit valuation adjustment, or CVA, as well as various of the
other XVA; (iii) For discounting, the OIS curve is used for the "risk
free rate", as opposed to LIBOR as previously, and, relatedly, quants
must model under a "multi-curve framework" (LIBOR is being
phased out, with replacements including SOFR and TONAR,
necessitating technical changes to the latter framework, while the
underlying logic is unaffected).

Types
Front office quantitative analyst
In sales and trading, quantitative analysts work to determine prices,
manage risk, and identify profitable opportunities. Historically this
was a distinct activity from trading but the boundary between
a desk quantitative analyst and a quantitative trader is increasingly
blurred, and it is now difficult to enter trading as a profession
without at least some quantitative analysis education.
Front office work favours a higher speed to quality ratio, with a
greater emphasis on solutions to specific problems than detailed
modeling. FOQs typically are significantly better paid than those in
back office, risk, and model validation. Although highly skilled
analysts, FOQs frequently lack software engineering experience or
formal training, and bound by time constraints and business
pressures, tactical solutions are often adopted.
Increasingly, quants are attached to specific desks. Two cases
are: XVA specialists, responsible for managing counterparty risk as
well as (minimizing) the capital requirements under Basel III;
and structurers, tasked with the design and manufacture of client
specific solutions.
Quantitative investment management
Further information: Quantitative fund
See also: Outline of finance § Quantitative investing
Quantitative analysis is used extensively by asset managers. Some,
such as FQ, AQR or Barclays, rely almost exclusively on quantitative
strategies while others, such as PIMCO, BlackRock or Citadel use a
mix of quantitative and fundamental methods.
One of the first quantitative investment funds to launch was based
in Santa Fe, New Mexico and began trading in 1991 under the
name Prediction Company.[7][12] By the late-1990s, Prediction
Company began using statistical arbitrage to secure investment
returns, along with three other funds at the time, Renaissance
Technologies and D. E. Shaw & Co, both based in New York.
[7]
Prediction hired scientists and computer programmers from the
neighboring Los Alamos National Laboratory to create sophisticated
statistical models using "industrial-strength computers" in order to
"[build] the Supercollider of Finance".[13][14]
Machine learning models are now capable of identifying complex
patterns in financial market data. With the aid of artificial
intelligence, investors are increasingly turning to deep learning
techniques to forecast and analyze trends in stock and foreign
exchange markets.[15] See Applications of artificial intelligence
§ Trading and investment.
Library quantitative analysis
Major firms invest large sums in an attempt to produce standard
methods of evaluating prices and risk. These differ from front office
tools in that Excel is very rare, with most development being in C+
+, though Java, C# and Python are sometimes used in non-
performance critical tasks. LQs spend more time modeling ensuring
the analytics are both efficient and correct, though there is tension
between LQs and FOQs on the validity of their results. LQs are
required to understand techniques such as Monte Carlo
methods and finite difference methods, as well as the nature of the
products being modeled.
Algorithmic trading quantitative analyst
Often the highest paid form of Quant, ATQs make use of methods
taken from signal processing, game theory, gambling Kelly
criterion, market microstructure, econometrics, and time
series analysis.
Risk management
Further information: Financial risk management
§ Banking, Investment banking § Risk management, and Bank
§ Capital and risk
This area has grown in importance in recent years, as the credit
crisis exposed holes in the mechanisms used to ensure that
positions were correctly hedged; see FRTB, {{Section link}}:
required section parameter(s) missing. A core technique continues
to be value at risk - applying both the
parametric and "Historical" approaches, as well as Conditional value
at risk and Extreme value theory - while this is supplemented with
various forms of stress test, expected
shortfall methodologies, economic capital analysis, direct analysis of
the positions at the desk level, and, as below, assessment of the
models used by the bank's various divisions.
Innovation
After the 2008 financial crisis, there surfaced the recognition that
quantitative valuation methods were generally too narrow in their
approach. An agreed upon fix adopted by numerous financial
institutions has been to improve collaboration.
Model validation
Model validation (MV) takes the models and methods developed by
front office, library, and modeling quantitative analysts and
determines their validity and correctness; see model risk. The MV
group might well be seen as a superset of the quantitative
operations in a financial institution, since it must deal with new and
advanced models and trading techniques from across the firm.
Post crisis, regulators now typically talk directly to the quants in the
middle office - such as the model validators - and since profits highly
depend on the regulatory infrastructure, model validation has
gained in weight and importance with respect to the quants in the
front office.
Before the crisis however, the pay structure in all firms was such
that MV groups struggle to attract and retain adequate staff, often
with talented quantitative analysts leaving at the first opportunity.
This gravely impacted corporate ability to manage model risk, or to
ensure that the positions being held were correctly valued. An MV
quantitative analyst would typically earn a fraction of quantitative
analysts in other groups with similar length of experience. In the
years following the crisis, as mentioned, this has changed.
Quantitative developer
Quantitative developers, sometimes called quantitative software
engineers, or quantitative engineers, are computer specialists that
assist, implement and maintain the quantitative models. They tend
to be highly specialised language technicians that bridge the gap
between software engineers and quantitative analysts. The term is
also sometimes used outside the finance industry to refer to those
working at the intersection of software engineering and quantitative
research.
Hypothesis of non-ergodicity of financial markets
The nonergodicity of financial markets and the time dependence of
returns are central issues in modern approaches to quantitative
trading. Financial markets are complex systems in which traditional
assumptions, such as independence and normal distribution of
returns, are frequently challenged by empirical evidence. [16][17] Thus,
under the non-ergodicity hypothesis, the future returns about an
investment strategy, which operates on a non-stationary system,
depend on the ability of the algorithm itself to predict the future
evolutions to which the system is subject. As discussed by Ole
Peters in 2011, ergodicity is a crucial element in understanding
economic dynamics,[18] especially in non-stationary contexts.
Identifying and developing methodologies to estimate this ability
represents one of the main challenges of modern quantitative
trading.[19][20] In this perspective, it becomes fundamental to shift the
focus from the result of individual financial operations to the
individual evolutions of the system.
Operationally, this implies that clusters of trades oriented in the
same direction offer little value in evaluating the strategy. On the
contrary, sequences of trades with alternating buy and sell are
much more significant. Since they indicate that the strategy is
actually predicting a statistically significant number of evolutions of
the system.

Mathematical and statistical approaches

Further information: Mathematical finance, Financial modeling
§ Quantitative finance, Outline of finance § Mathematical tools,
and Financial economics § Derivative pricing
Because of their backgrounds, quantitative analysts draw from
various forms of
mathematics: statistics and probability, calculus centered
around partial differential equations, linear algebra, discrete
mathematics, and econometrics. Some on the buy side may
use machine learning. The majority of quantitative analysts have
received little formal education in mainstream economics, and often
apply a mindset drawn from the physical sciences. Quants use
mathematical skills learned from diverse fields such as computer
science, physics and engineering. These skills include (but are not
limited to) advanced statistics, linear algebra and partial differential
equations as well as solutions to these based upon numerical
analysis.
Commonly used numerical methods are:
 Finite difference method – used to solve partial differential
equations;
 Monte Carlo method – Also used to solve partial differential
equations, but Monte Carlo simulation is also common in risk
management;
 Ordinary least squares – used to estimate parameters in statistical
regression analysis;
 Spline interpolation – used to interpolate values from spot and
forward interest rates curves, and volatility smiles;
 Bisection, Newton, and Secant methods – used to find
the roots, maxima and minima of functions (e.g. internal rate of
return, interest rate curve-building.)
Techniques
A typical problem for a mathematically oriented quantitative analyst
would be to develop a model for pricing, hedging, and risk-managing
a complex derivative product. These quantitative analysts tend to
rely more on numerical analysis than statistics and econometrics.
One of the principal mathematical tools of quantitative finance
is stochastic calculus. The mindset, however, is to prefer a
deterministically "correct" answer, as once there is agreement on
input values and market variable dynamics, there is only one correct
price for any given security (which can be demonstrated, albeit
often inefficiently, through a large volume of Monte Carlo
simulations).
A typical problem for a statistically oriented quantitative analyst
would be to develop a model for deciding which stocks are relatively
expensive and which stocks are relatively cheap. The model might
include a company's book value to price ratio, its trailing earnings to
price ratio, and other accounting factors. An investment manager
might implement this analysis by buying the underpriced stocks,
selling the overpriced stocks, or both. Statistically oriented
quantitative analysts tend to have more of a reliance on statistics
and econometrics, and less of a reliance on sophisticated numerical
techniques and object-oriented programming. These quantitative
analysts tend to be of the psychology that enjoys trying to find the
best approach to modeling data, and can accept that there is no
"right answer" until time has passed and we can retrospectively see
how the model performed. Both types of quantitative analysts
demand a strong knowledge of sophisticated mathematics and
computer programming proficiency.
 Education
See also: Outline of finance § Education, Financial engineering
§ Education, Financial modeling § Quantitative finance,
and Financial analyst § Qualification
Quantitative analysts often come from applied
mathematics, physics or engineering backgrounds, [21] learning
finance "on the job". Quantitative analysis is a then major source of
employment for those with mathematics and physics PhD degrees.
[21]

Typically, a quantitative analyst will also need [21][22] extensive skills

in computer programming, most commonly C, C++ and Java, and
lately R, MATLAB, Mathematica, and Python. Data
science and machine learning analysis and methods are being
increasingly employed in portfolio performance and portfolio risk
modelling,[23][24] and as such data science and machine learning
Master's graduates are also hired as quantitative analysts.
The demand for quantitative skills has led to [21] the creation of
specialized Masters [22] and PhD courses in financial
engineering, mathematical finance and computational finance (as
well as in specific topics such as financial reinsurance). In particular,
the Master of Quantitative Finance, Master of Financial
Mathematics, Master of Computational Finance and Master of
Financial Engineering are becoming popular with students and with
employers.[22][25] See Master of Quantitative Finance § History.
This has, in parallel, led to a resurgence in demand
for actuarial qualifications, as well as commercial certifications such
as the CQF. Similarly, the more general Master of
Finance (and Master of Financial Economics)
increasingly [25] includes a significant technical component. Likewise,
masters programs in operations research, computational
statistics, applied mathematics and industrial engineering may offer
a quantitative finance specialization.

Academic and technical field journals

 Society for Industrial and Applied Mathematics (SIAM) Journal on
Financial Mathematics
 The Journal of Portfolio Management[26]
 Quantitative Finance[27]
 Risk Magazine
 Wilmott Magazine
 Finance and Stochastics[28]
 Mathematical Finance

Areas of work
 Trading strategy development
 Portfolio management and Portfolio optimization
 Derivatives pricing and hedging: involves software development,
advanced numerical techniques, and stochastic calculus.
 Risk management: involves a lot of time series analysis, calibration,
and backtesting.
 Credit analysis
 Asset and liability management
 Structured finance and securitization
 Asset pricing

Seminal publications
 1900 – Louis Bachelier, Théorie de la spéculation
 1938 – Frederick Macaulay, The Movements of Interest Rates. Bond
Yields and Stock Prices in the United States since 1856, pp. 44–
53, Bond duration
 1944 – Kiyosi Itô, "Stochastic Integral", Proceedings of the Imperial
Academy, 20(8), pp. 519–524
 1952 – Harry Markowitz, Portfolio Selection, Modern portfolio theory
 1956 – John Kelly, A New Interpretation of Information Rate
 1958 – Franco Modigliani and Merton Miller, The Cost of Capital,
Corporation Finance and the Theory of Investment, Modigliani–Miller
theorem and Corporate finance
 1964 – William F. Sharpe, Capital asset prices: A theory of market
equilibrium under conditions of risk, Capital asset pricing model
 1965 – John Lintner, The Valuation of Risk Assets and the Selection
of Risky Investments in Stock Portfolios and Capital Budgets, Capital
asset pricing model
 1967 – Edward O. Thorp and Sheen Kassouf, Beat the Market
 1972 – Eugene Fama and Merton Miller, Theory of Finance
 1972 – Martin L. Leibowitz and Sydney Homer, Inside the Yield
Book, Fixed income analysis
 1973 – Fischer Black and Myron Scholes, The Pricing of Options and
Corporate Liabilities and Robert C. Merton, Theory of Rational
Option Pricing, Black–Scholes
 1976 – Fischer Black, The pricing of commodity contracts, Black
model
 1977 – Phelim Boyle, Options: A Monte Carlo Approach, Monte Carlo
methods for option pricing
 1977 – Oldřich Vašíček, An equilibrium characterisation of the term
structure, Vasicek model
 1979 – John Carrington Cox; Stephen Ross; Mark Rubinstein, Option
pricing: A simplified approach, Binomial options pricing
model and Lattice model
 1980 – Lawrence G. McMillan, Options as a Strategic Investment
 1982 – Barr Rosenberg and Andrew Rudd, Factor-Related and
Specific Returns of Common Stocks: Serial Correlation and Market
Inefficiency, Journal of Finance, May 1982 V. 37: #2
 1982 – Robert Engle, Autoregressive Conditional Heteroskedasticity
With Estimates of the Variance of U.K. Inflation, Seminal paper in
ARCH family of models GARCH
 1985 – John C. Cox, Jonathan E. Ingersoll and Stephen Ross, A
theory of the term structure of interest rates, Cox–Ingersoll–Ross
model
 1987 – Giovanni Barone-Adesi and Robert Whaley, Efficient analytic
approximation of American option values. Journal of Finance. 42 (2):
301–20. Barone-Adesi and Whaley method for pricing American
options.
 1987 – David Heath, Robert A. Jarrow, and Andrew Morton Bond
pricing and the term structure of interest rates: a new
methodology (1987), Heath–Jarrow–Morton framework for interest
rates
 1990 – Fischer Black, Emanuel Derman and William Toy, A One-
Factor Model of Interest Rates and Its Application to Treasury
Bond, Black–Derman–Toy model
 1990 – John Hull and Alan White, "Pricing interest-rate derivative
securities", The Review of Financial Studies, Vol 3, No. 4 (1990) Hull-
White model
 1991 – Ioannis Karatzas & Steven E. Shreve. Brownian motion and
stochastic calculus.
 1992 – Fischer Black and Robert Litterman: Global Portfolio
Optimization, Financial Analysts Journal, September 1992, pp. 28–
43 JSTOR 4479577 Black–Litterman model
 1994 – J.P. Morgan RiskMetrics Group, RiskMetrics Technical
Document[permanent dead link], 1996, RiskMetrics model and framework
 2002 – Patrick Hagan, Deep Kumar, Andrew Lesniewski, Diana
Woodward, Managing Smile Risk, Wilmott Magazine, January
2002, SABR volatility model.
 2004 – Emanuel Derman, My Life as a Quant: Reflections on Physics
and Finance

See also
 List of quantitative analysts
 Quantitative fund
 Financial modeling
 Black–Scholes equation
 Financial signal processing
 Financial analyst
 Technical analysis
 Fundamental analysis
 Financial economics
 Mathematical finance
 Alpha generation platform
 Rocket science (finance)

References
Further reading
 Bernstein, Peter L. (1992) Capital Ideas: The Improbable Origins of
Modern Wall Street
 Bernstein, Peter L. (2007) Capital Ideas Evolving
 Derman, Emanuel (2007) My Life as a Quant ISBN 0-470-19273-9
 Patterson, Scott D. (2010). The Quants: How a New Breed of Math
Whizzes Conquered Wall Street and Nearly Destroyed It. Crown
Business, 352 pages. ISBN 0-307-45337-5 ISBN 978-0-307-45337-
2. Amazon page for book via Patterson and Thorp interview on Fresh
Air, February 1, 2010, including excerpt "Chapter 2: The Godfather:
Ed Thorp". Also, an excerpt from "Chapter 10: The August Factor", in
the January 23, 2010 Wall Street Journal.
 Read, Colin (2012) Rise of the Quants (Great Minds in Finance
Series) ISBN 023027417X
 Analysing Quantitative Data for Business and Management Students

External links
 Society of Quantitative Analysts
 Q-Group Institute for Quantitative Research in Finance
 CQA—Chicago Quantitative Alliance
 Quantitative Work Alliance for Finance Education and Wisdom
(QWAFAFEW)
 Professional Risk Managers Industry Association (PRMIA)
 International Association of Quantitative Finance
 London Quant Group
 Quantitative Finance at Stack Exchange – question and answer site
for quantitative finance

Supply chain management field of

operations: complex and dynamic supply and demand networks[1] (cf. Wieland/Wallenburg,
2011) In an efficient supply chain,
agreements are aligned.
In commerce, supply chain management (SCM) deals with a
system of procurement (purchasing raw
materials/components), operations management, logistics and marketing
channels, through which raw materials can be developed into finished
products and delivered to their end customers.[2][3] A more narrow
definition of supply chain management is the "design, planning,
execution, control, and monitoring of supply chain activities with the
objective of creating net value, building a competitive infrastructure,
leveraging worldwide logistics, synchronising supply with demand
and measuring performance globally".[4][5] This can include the
movement and storage of raw materials, work-in-process inventory,
finished goods, and end to end order fulfilment from the point of
origin to the point of consumption. Interconnected, interrelated or
interlinked networks, channels and node businesses combine in the
provision of products and services required by end customers in
a supply chain.[6]
SCM is the broad range of activities required to plan, control and
execute a product's flow from materials to production to distribution
in the most economical way possible. SCM encompasses the
integrated planning and execution of processes required to optimize
the flow of materials, information and capital in functions that
broadly include demand planning, sourcing, production, inventory
management and logistics—or storage and transportation. [7]
Supply chain management strives for an integrated,
multidisciplinary, multimethod approach.[8] Current [when?] research in
supply chain management is concerned with topics related
to resilience, sustainability, and risk management,[9] among others.
Some suggest that the "people dimension" of SCM, ethical issues,
internal integration, transparency/visibility, and human capital/talent
management are topics that have, so far, been underrepresented on
the research agenda.[10]

Intention
Supply chain management, techniques with the aim of coordinating
all parts of SC, from supplying raw materials to delivering and/or
resumption of products, tries to minimize total costs with respect to
existing conflicts among the chain partners. An example of these
conflicts is the interrelation between the sale department desiring to
have higher inventory levels to fulfill demands and the warehouse for
which lower inventories are desired to reduce holding costs.[11]

Origin of the term and definitions

In 1982, Keith Oliver, a consultant at Booz Allen Hamilton, introduced
the term "supply chain management" to the public domain in an
interview for the Financial Times.[12] In 1983 WirtschaftsWoche in
Germany published for the first time the results of an implemented
and so called "Supply Chain Management project", led by Wolfgang
Partsch.[13]
In the mid-1990s, the term "supply chain management" gained
popularity when a flurry of articles and books came out on the
subject. Supply chains were originally defined as encompassing all
activities associated with the flow and transformation of goods from
raw materials through to the end user or final consumer, as well as
the associated information flows. Mentzer et al. consider it worthy of
note that the final consumer was included within these early
definitions.[14]: 2 Supply chain management was then further defined
as the integration of supply chain activities through improved supply
chain relationships to achieve a competitive advantage. [12]
In the late 1990s, "supply chain management" (SCM) rose to
prominence, and operations managers began to use it in their titles
with increasing regularity.[15][16][17] A supply chain, as opposed to
supply chain management, is a set of firms who move materials
"forward",[18] or a set of organizations, directly linked by one or more
upstream and downstream flows of products, services, finances, or
 information from a source to a customer. Supply chain management
is the management of such a chain.[14]
Other commonly accepted definitions of supply chain management
include:
 The management of upstream and downstream value-added flows
of materials, final goods, and related information among suppliers,
company, resellers, and final consumers.[19]
 The systematic, strategic coordination of traditional business
functions and tactics across all business functions within a particular
company and across businesses within the supply chain, for the
purposes of improving the long-term performance of the individual
companies and the supply chain as a whole. [14]
 A customer-focused definition is given by Hines (2004:p76): "Supply
chain strategies require a total systems view of the links in the chain
that work together efficiently to create customer satisfaction at the
end point of delivery to the consumer. As a consequence, costs
must be lowered throughout the chain by driving out unnecessary
expenses, movements, and handling. The main focus is turned to
efficiency and added value, or the end user's perception of value.
Efficiency must be increased, and bottlenecks removed. The
measurement of performance focuses on total system efficiency and
the equitable monetary reward distribution to those within the
supply chain. The supply chain system must be responsive to
customer requirements."[20]
 The integration of key business processes across the supply chain
for the purpose of creating value for customers and stakeholders. [21]
[22]

 According to the Council of Supply Chain Management Professionals

(CSCMP), supply chain management encompasses the planning and
management of all activities involved in sourcing, procurement,
conversion, and logistics management. It also includes coordination
and collaboration with channel partners, which may
be suppliers, intermediaries, third-party service providers, or customers.
[23]
Supply chain management integrates supply and
demand management within and across companies. More recently,
the loosely coupled, self-organizing network of businesses that
cooperate to provide product and service offerings has been called
the Extended Enterprise.[citation needed]
Mentzer et al. make a further distinction between "supply chain
management" and a "supply chain orientation". The latter term
involves a recognition that a business strategy cannot be fulfilled
without managing the activities of suppliers and customers
upstream and downstream, whereas the former term is used for
"the actual implementation of this orientation".[14]
Supply chain visibility, in its origins, was concerned with
knowledge of the location, production stage and expected delivery
date of incoming products and materials, so that production could
be planned,[24] but the development of the term has enabled it to be
used to plan orders using knowledge of potential supplies, and to
track post-production processes as far as delivery to customers.
[25]
The UK Government also uses the term "supply chain visibility" in
conjunction with its mandate to ensure that potential suppliers have
visibility into future supply opportunities. The government's action
note on supply chain visibility covers obligations and appropriate
contractual wording requiring prime suppliers to advertise sub-
contracting opportunities and to report on their spend with small and
medium-sized enterprises and voluntary/community organisations
within their supply chains.[26] The concept of a "supply chain control
tower" reflects the "end-to-end visibility" provided by an air traffic
control tower.[27] Writing for Gartner, sees a "supply chain control
tower" as a concept which combines the capacities of "people,
process, data, organization and technology" to improve supply chain
visibility, noting that the technology behind a system which draws
together information from a number of sources should not be
separated from the people and processes it supports in order to
improve visibility.[28]
Supply chain management software includes tools or modules used to
execute supply chain transactions, manage supplier relationships,
and control associated business processes. [29] The overall goal of the
software is to improve supply chain performance by monitoring a
company's supply chain network from end-to-end (suppliers,
transporters, returns, warehouses, retailers, manufacturers, and
customers).[29]
In some cases, a supply chain includes the collection of goods after
consumer use for recycling or the reverse logistics processes for
returning faulty or unwanted products back to producers up the
value chain.[30]

Functions
Supply chain management is a cross-functional approach that
includes managing the movement of raw materials into an
organization, certain aspects of the internal processing of materials
into finished goods, and the movement of finished goods out of the
organization and toward the end consumer. As organizations strive
to focus on core competencies and become more flexible, they
reduce ownership of raw materials sources and distribution
channels. These functions are increasingly being outsourced to
other firms that can perform the activities better or more cost
effectively. The effect is to increase the number of organizations
involved in satisfying customer demand, while reducing managerial
control of daily logistics operations. Less control and more supply
chain partners lead to the creation of the concept of supply chain
management.[31] Supply chain management is concerned with
improving trust and collaboration among supply chain partners, thus
improving inventory visibility and the velocity of inventory
movement.[32][33]

Importance
Organizations increasingly find that they must rely on effective
supply chains, or networks, to compete in the global market and
networked economy.[34] In Peter Drucker's (1998) new management
paradigms, this concept of business relationships extends beyond
traditional enterprise boundaries and seeks to organize entire
business processes throughout a value chain of multiple companies.
According to Drucker, "the greatest change in corporate culture—
and the way business is being conducted—may be the accelerated
growth of relationships based not on ownership, but on
partnership."[35] This approach allows companies to leverage the
strengths and capabilities of various partners to achieve greater
efficiency and innovation, ultimately enhancing overall business
performance.[35][36]
In recent decades, globalization, outsourcing, and information
technology have enabled many organizations, such
as Dell and Hewlett-Packard, to successfully operate collaborative
supply networks in which each specialized business partner focuses
on only a few key strategic activities.[37] This inter-organizational
supply network can be acknowledged as a new form of organization.
However, with the complicated interactions among the players, the
network structure fits neither "market" nor "hierarchy" categories.
[38]
It is not clear what kind of performance impacts different supply-
network structures could have on firms, and little is known about the
coordination conditions and trade-offs that may exist among the
players. From a systems perspective, a complex network structure
can be decomposed into individual component firms. [39] Traditionally,
companies in a supply network concentrate on the inputs and
outputs of the processes, with little concern for the internal
management working of other individual players. Therefore, the
choice of an internal management control structure is known to
impact local firm performance.[40]
In the 21st century, changes in the business environment have
contributed to the development of supply chain networks. First, as
an outcome of globalization and the proliferation of multinational
companies, joint ventures, strategic alliances, and business
partnerships, significant success factors were identified,
complementing the earlier "just-in-time", lean manufacturing, and agile
manufacturing practices.[41][42][43][44] Second, technological changes,
particularly the dramatic fall in communication costs (a significant
component of transaction costs), have led to changes in
coordination among the members of the supply chain network. [45]
Many researchers have recognized supply network structures as a
new organizational form, using terms such as " Keiretsu", "Extended
Enterprise", "virtual supply chain",[46] "Global Production Network", and
"Next Generation Manufacturing System".[47][48][49] In general, such a
structure can be defined as "a group of semi-independent
organizations, each with their capabilities, which collaborate in ever-
changing constellations to serve one or more markets in order to
achieve some business goal specific to that collaboration". [50]
The importance of supply chain management proved crucial in the
2019-2020 fight against the coronavirus (COVID-19) pandemic that
swept across the world.[51] During the pandemic period, governments
in countries which had in place effective domestic supply chain
management had enough medical supplies to support their needs
and enough to donate their surplus to front-line health workers in
other jurisdictions.[52][53][54] The devastating COVID-19 crisis in US has
turned many sectors of the local economy upside down, including
the country's storied logistics industry. Some organizations were
able to quickly develop foreign supply chains in order to import
much needed medical supplies.[55][56][57]
Supply chain management is also important for organizational
learning. Firms with geographically more extensive supply chains
connecting diverse trading cliques tend to become more innovative
and productive.[58]
The security-management system for supply chains is described in
ISO/IEC 28000 and ISO/IEC 28001 and related standards published
jointly by the ISO and the IEC. Supply Chain Management draws
heavily from the areas of operations management, logistics,
procurement, and information technology, and strives for an
integrated approach.

Supply chain resilience

An important element of SCM is supply chain resilience, defined as
"the capacity of a supply chain to persist, adapt, or transform in the
face of change".[59] For a long time, the interpretation of resilience in
the sense of engineering resilience (= robustness[60]) prevailed in
supply chain management, leading to the notion of persistence.[59] A
popular implementation of this idea is given by measuring the time-
to-survive and the time-to-recover of the supply chain, allowing to
identify weak points in the system.[61] The APICS Certified Supply
Chain Professional (CSCP) program emphasizes the importance of
managing risks and enhancing resilience. According to APICS, in
order to manage global interruptions and preserve operational
continuity, a robust supply chain is vital. [36]
More recently, the interpretations of resilience in the sense
of ecological resilience and social–ecological resilience have led to the
notions of adaptation and transformation, respectively.[59] A supply
chain is thus interpreted as a social-ecological system that – similar to
an ecosystem (e.g. forest) – is able to constantly adapt to external
environmental conditions and – through the presence of social
actors and their ability to foresight – also to transform itself into a
fundamentally new system.[62] This leads to
a panarchical interpretation of a supply chain, embedding it into
a system of systems, allowing to analyze the interactions of the supply
chain with systems that operate at other levels (e.g. society,
political economy, planet Earth).[62]
For example, these three components of resilience can be discussed
for the 2021 Suez Canal obstruction, when a ship blocked the canal for
several days. Persistence means to "bounce back"; in our example it
is about removing the ship as quickly as possible to allow "normal"
operations. Adaptation means to accept that the system has
reached a "new normal" state and to act accordingly; here, this can
be implemented by redirecting ships around the African cape or use
alternative modes of transport. Finally, transformation means to
question the assumptions of globalization, outsourcing and linear
supply chains and to envision alternatives; in this example this could
lead to local and circular supply chains that do not need global
transportation routes any longer.

Historical developments
Six major movements can be observed in the evolution of supply
chain management studies: creation, integration, globalization,
[63]
specialization phases one and two, and SCM 2.0.
Creation era
The term "supply chain management" was first coined by Keith
Oliver in 1982. However, the concept of a supply chain in
management was of great importance long before, in the early 20th
century, especially with the creation of the assembly line. The
characteristics of this era of supply chain management include the
need for large-scale changes, re-engineering, downsizing driven
by cost reduction programs, and widespread attention to Japanese
management practices. However, the term became widely adopted
after the publication of the seminal book Introduction to Supply
Chain Management in 1999 by Robert B. Handfield and Ernest L.
Nichols, Jr.,[64] which published over 25,000 copies and was
translated into Japanese, Korean, Chinese, and Russian. [65]
Integration era
This era of supply chain management studies was highlighted with
the development of electronic data interchange (EDI) systems in the
1960s and developed through the 1990s by the introduction
of enterprise resource planning (ERP) systems. This era has continued
to develop into the 21st century with the expansion of Internet-
based collaborative systems. This era of supply chain evolution is
characterized by both increasing value-added and reducing costs
through integration.[citation needed]
A supply chain can be classified as a stage 1, 2, or 3 network. In
stage 1–type supply chain, systems such as production, storage,
distribution, and material control are not linked and are independent
of each other. In a stage 2 supply chain, these are integrated under
one plan, and enterprise resource planning (ERP) is enabled. A stage
3 supply chain is one that achieves vertical integration with upstream
suppliers and downstream customers. An example of this kind of
supply chain is Tesco.[citation needed]
Globalization era
It is the third movement of supply chain management development,
the globalization era, can be characterized by the attention given to
global systems of supplier relationships and the expansion of supply
chains beyond national boundaries and into other continents.
Although the use of global sources in organizations' supply chains
can be traced back several decades (e.g., in the oil industry), it was
not until the late 1980s that a considerable number of organizations
started to integrate global sources into their core business. [citation
needed]
This era is characterized by the globalization of supply chain
management in organizations with the goal of increasing their
competitive advantage, adding value, and reducing costs through
global sourcing.[citation needed]
Specialization era (phase I): outsourced manufacturing and
distribution
In the 1990s, companies began to focus on "core competencies" and
specialization. They abandoned vertical integration, sold off non-
core operations, and outsourced those functions to other companies.
This changed management requirements, as the supply chain
extended beyond the company walls and management was
distributed across specialized supply chain partnerships. [citation needed]
This transition also refocused the fundamental perspectives of each
organization. Original equipment manufacturers (OEMs) became brand
owners that required visibility deep into their supply base. They had
to control the entire supply chain from above, instead of from within.
Contract manufacturers had to manage bills of material with
different part-numbering schemes from multiple OEMs and support
customer requests for work-in-process visibility and vendor-managed
inventory (VMI).[citation needed]
The specialization model creates manufacturing and distribution
networks composed of several individual supply chains specific to
producers, suppliers, and customers that work together to design,
manufacture, distribute, market, sell, and service a product. This set
of partners may change according to a given market, region, or
channel, resulting in a proliferation of trading partner environments,
each with its own unique characteristics and demands. [citation needed]
Specialization era (phase II): supply chain management as a
service
Specialization within the supply chain began in the 1980s with the
inception of transportation brokerages, warehouse management
(storage and inventory), and non-asset-based carriers, and has
matured beyond transportation and logistics into aspects of supply
planning, collaboration, execution, and performance management.
Market forces sometimes demand rapid changes from suppliers,
logistics providers, locations, or customers in their role as
components of supply chain networks. This variability has significant
effects on supply chain infrastructure, from the foundation layers of
establishing and managing electronic communication between
trading partners to more complex requirements such as the
configuration of processes and workflows that are essential to the
management of the network itself.
Supply chain specialization enables companies to improve their
overall competencies in the same way that outsourced
manufacturing and distribution has done; it allows them to focus on
their core competencies and assemble networks of specific, best-in-
class partners to contribute to the overall value chain itself, thereby
increasing overall performance and efficiency. The ability to quickly
obtain and deploy this domain-specific supply chain expertise
without developing and maintaining an entirely unique and complex
competency in house is a leading reason why supply chain
specialization is gaining popularity.
Outsourced technology hosting for supply chain solutions debuted in
the late 1990s and has taken root primarily in transportation and
collaboration categories. This has progressed from the application
service provider (ASP) model from roughly 1998 through 2003 to the
on-demand model from approximately 2003 through 2006, to the
software as a service (SaaS) model currently in focus today.
Supply chain management 2.0 (SCM 2.0)
The term SCM 2.0 has been coined to describe both changes within
supply chains themselves as well as the evolution of processes,
methods, and tools to manage them in a new era of globalization
and specialization. One element of this is the growing popularity
of supply chain collaboration platforms that connect multiple buyers
and suppliers with financial institutions, enabling them to conduct
automated supply chain finance transactions. [66]
 Web 2.0 is a trend in the use of the World Wide Web that is meant to
increase creativity, information sharing, and collaboration among
users. At its core, the common attribute of Web 2.0 is to help
navigate the vast information available on the Web in order to find
what is being bought. It is the notion of a usable pathway. SCM 2.0
replicates this notion in supply chain operations. It is the pathway to
SCM results, a combination of processes, methodologies, tools, and
delivery options to guide companies to their results quickly as the
complexity and speed of the supply chain increase due to global
competition; rapid price fluctuations; changing oil prices; short
product life cycles; expanded specialization; near-, far-, and off-
shoring; and talent scarcity.
Increasing volatility has characterized supply chains since about
2000. Douglass in 2010 referred to an SCM management style
known as "extreme supply chain management", which:
recognizes the need for collective, rather than sequential, risk
management and facilitates collaboration on a new scale that is
necessary for survival. It challenges companies to be "perpetually
vigilant".[67]

Business-process integration
Successful SCM requires a change from managing individual
functions to integrating activities into key supply chain processes. In
an example scenario, a purchasing department places orders as its
requirements become known. The marketing department,
responding to customer demand, communicates with several
distributors and retailers as it attempts to determine ways to satisfy
this demand. Information shared between supply chain partners can
only be fully leveraged through business process integration, e.g.,
using electronic data interchange.
Supply chain business process integration involves collaborative
work between buyers and suppliers, joint product development,
common systems, and shared information. According to Lambert
and Cooper (2000), operating an integrated supply chain requires a
continuous information flow. However, in many companies,
management has concluded that optimizing product flows cannot be
accomplished without implementing a process approach. The key
supply chain processes as stated by Lambert (2004) [68] are:
 Customer relationship management
 Customer service management
 Demand management
 Order fulfillment
 Manufacturing flow management
 Supplier relationship management
 Product development and commercialization
 Returns management
Much has been written about demand management.[69] Best-in-class
companies have similar characteristics, which include the following:
 Internal and external collaboration
 Initiatives to reduce lead time
 Tighter feedback from customer and market demand
 Customer-level forecasting
One could suggest other critical supply business processes that
combine these processes stated by Lambert, such as:
Customer service management process
Customer relationship management concerns the relationship
between an organization and its customers. Customer service is
the source of customer information. It also provides the
customer with real-time information on scheduling and product
availability through interfaces with the company's production
and distribution operations. Successful organizations use the
following steps to build customer relationships:
 determine mutually satisfying goals for organization and
customers
 establish and maintain customer rapport
 induce positive feelings in the organization and the customers
Business strategy integration
Effective business process integration in supply chain management
requires not only continuous communication, but also strategic
coordination across departments and partner companies. The main
reason for this is that it can effectively improve agility. [70] At the
same time, this integration can help businesses respond quickly to
changes in demand and improve customer satisfaction.
Inventory management
Inventory management is concerned with ensuring the right
stock at the right levels, in the right place, at the right time
and the right cost. Inventory management entails inventory
planning and forecasting: forecasting helps planning inventory.
Procurement process
 Strategic plans are drawn up with suppliers to support the
manufacturing flow management process and the
development of new products.[71] In firms whose operations
extend globally, sourcing may be managed on a global basis.
The desired outcome is a relationship where both parties
benefit and a reduction in the time required for the product's
design and development. The purchasing function may also
develop rapid communication systems, such as electronic data
interchange (EDI) and internet linkage, to convey possible
requirements more rapidly. Activities related to obtaining
products and materials from outside suppliers involve resource
planning, supply sourcing, negotiation, order placement,
inbound transportation, storage, handling, and quality assurance,
many of which include the responsibility to coordinate with
suppliers on matters of scheduling, supply continuity
(inventory), hedging, and research into new sources or
programs. Procurement has recently been recognized as a core
source of value, driven largely by the increasing trends to
outsource products and services, and the changes in the global
ecosystem requiring stronger relationships between buyers
and sellers.[72]
Product development and commercialization
Here, customers and suppliers must be integrated into the
product development process in order to reduce the time to
market. As product life cycles shorten, the appropriate products
must be developed and successfully launched with ever-
shorter time schedules in order for firms to remain
competitive. According to Lambert and Cooper (2000),
managers of the product development and commercialization
process must:
1. coordinate with customer relationship management to identify
customer-articulated needs;
2. select materials and suppliers in conjunction with procurement;
and
3. develop production technology in manufacturing flow to
manufacture and integrate into the best supply chain flow for
the given combination of product and markets.
Integration of suppliers into the new product development process
was shown to have a major impact on product target cost, quality,
delivery, and market share. Tapping into suppliers as a source of
innovation requires an extensive process characterized by
development of technology sharing, but also involves managing
intellectual[73] property issues.
Manufacturing flow management process
The manufacturing process produces and supplies products to
the distribution channels based on past forecasts.
Manufacturing processes must be flexible in order to respond
to market changes and must accommodate mass customization.
Orders are processes operating on a just-in-time (JIT) basis in
minimum lot sizes. Changes in the manufacturing flow process
lead to shorter cycle times (cycle time compression), meaning
improved responsiveness and efficiency in meeting customer
demand. La Londe and Masters found in 1994 research that
improved supply chain management and cycle time
compression were complementary strategies adopted by
forward-looking businesses in the United States. [18] This process
manages activities related to planning, scheduling, and
supporting manufacturing operations, such as work-in-process
storage, handling, transportation, and time phasing of
components, inventory at manufacturing sites, and maximum
flexibility in the coordination of geographical and final
assemblies postponement of physical distribution operations.
Physical distribution
This concerns the movement of a finished product or service to
customers. In physical distribution, the customer is the final
destination of a marketing channel, and the availability of the
product or service is a vital part of each channel participant's
marketing effort. It is also through the physical distribution
process that the time and space of customer service become
an integral part of marketing. Thus it links a marketing channel
with its customers (i.e., it links manufacturers, wholesalers,
and retailers).
Outsourcing/partnerships
This includes not just the outsourcing of the procurement of
materials and components, but also the outsourcing of services
that traditionally have been provided in-house. The logic of this
trend is that the company will increasingly focus on those
activities in the value chain in which it has a distinctive
advantage and outsource everything else. This movement has
been particularly evident in logistics, where the provision of
transport, storage, and inventory control is increasingly
subcontracted to specialists or logistics partners. Also,
 managing and controlling this network of partners and
suppliers requires a blend of central and local involvement:
strategic decisions are taken centrally, while the monitoring
and control of supplier performance and day-to-day liaison with
logistics partners are best managed locally.
Performance measurement
Experts found a strong relationship from the largest arcs of
supplier and customer integration to market share and
profitability. Taking advantage of supplier capabilities and
emphasizing a long-term supply chain perspective in customer
relationships can both be correlated with a firm's performance.
As logistics competency becomes a critical factor in creating
and maintaining competitive advantage, measuring logistics
performance becomes increasingly important, because the
difference between profitable and unprofitable operations
becomes narrower. A.T. Kearney Consultants (1985) noted that
firms engaging in comprehensive performance measurement
realized improvements in overall productivity. According to
experts,[who?] internal measures are generally collected and
analyzed by the firm, including cost, customer service,
productivity, asset measurement, and quality. External
performance is measured through customer perception
measures and "best practice" benchmarking.
Warehousing management
To reduce a company's cost and expenses, warehousing
management is concerned with storage, reducing manpower
cost, dispatching authority with on time delivery, loading and
unloading facilities with proper area, inventory management
system etc.
Workflow management
Integrating suppliers and customers tightly into
a workflow (or business process) and thereby achieving an
efficient and effective supply chain is a key goal
of workflow management.

Theories
There are gaps in the literature on supply chain management
studies at present.[74] A few authors, such as Halldorsson et al.,
[75]
Ketchen and Hult (2006),[76] and Lavassani et al. (2009), have
tried to provide theoretical foundations for different areas related to
 supply chain by employing organizational theories, which may
include the following:
 Resource-based view (RBV)[77]
 Transaction cost analysis (TCA)
 Knowledge-based view (KBV)
 Strategic choice theory (SCT)
 Agency theory (AT)
 Channel coordination
 Institutional theory (InT)
 Systems theory (ST)
 Network perspective (NP)
 Materials logistics management (MLM)
 Just-in-time (JIT)
 Material requirements planning (MRP)
 Theory of constraints (TOC)
 Total quality management (TQM)
 Agile manufacturing
 Time-based competition (TBC)
 Quick response manufacturing (QRM)
 Customer relationship management (CRM)
 Requirements chain management (RCM)
 Dynamic Capabilities Theory
 Dynamic Management Theory
 Available-to-promise (ATP)
 Supply Chain Roadmap[78]
 Optimal Positioning of the Delivery Window (OPDW)[79][80]
However, the unit of analysis of most of these theories is not the
supply chain but rather another system, such as the firm or the
supplier-buyer relationship. Among the few exceptions is
the relational view, which outlines a theory for considering dyads and
networks of firms as a key unit of analysis for explaining superior
individual firm performance (Dyer and Singh, 1998). [81]

Organization and governance

The management of supply chains involve a number of specific
challenges regarding the organization of relationships among the
different partners along the value chain. Formal and informal
governance mechanisms are central elements in the management
of supply chain.[82] Particular combinations of governance
mechanisms may impact the relational dynamics within the supply
chain. The need for interdisciplinarity in SCM research has been
pointed out by academics in the field.[83]

Supply chain centroids

In the study of supply chain management, the concept
of centroids has become a useful economic consideration.
In mathematics and physics, a centroid is the arithmetic mean position
of all the points in a plane figure.[84] For supply chain management, a
centroid is a location with a high proportion of a country's population
and a high proportion of its manufacturing, generally within 500 mi
(805 km). In the US, two major supply chain centroids have been
defined, one near Dayton, Ohio, and a second near Riverside, California.
[citation needed][85]

The centroid near Dayton is particularly important because it is

closest to the population center of the US and Canada. Dayton is
within 500 miles of 60% of the US population and manufacturing
capacity, as well as 60% of Canada's population. [86] The region
includes the interchange between I-70 and I-75, one of the busiest in
the nation, with 154,000 vehicles passing through per day, of which
30–35% are trucks hauling goods. In addition, the I-75 corridor is
home to the busiest north–south rail route east of the Mississippi
River.[86]
A supply chain is the network of all the individuals, organizations,
resources, activities and technology involved in the creation and
sale of a product. A supply chain encompasses everything from the
delivery of source materials from the supplier to the manufacturer
through to its eventual delivery to the end user. The supply chain
segment involved with getting the finished product from the
manufacturer to the consumer is known as the distribution channel.
[87]

Wal-Mart strategic sourcing approaches

In 2010, Wal-Mart announced a big change in its sourcing strategy.
Initially, Wal-Mart relied on intermediaries in the sourcing process. It
bought only 20% of its stock directly, but the rest were bought
through the intermediaries.[88] Therefore, the company came to
realize that the presence of many intermediaries in the product
sourcing was actually increasing the costs in the supply chain. To
cut these costs, Wal-Mart decided to do away with intermediaries in
the supply chain and started direct sourcing of its goods from the
suppliers. Eduardo Castro-Wright, the then Vice President of Wal-
Mart, set an ambitious goal of buying 80% of all Wal-Mart goods
directly from the suppliers.[89] Walmart started purchasing fruits and
vegetables on a global scale, where it interacted directly with the
suppliers of these goods. The company later engaged the suppliers
of other goods, such as cloth and home electronics appliances,
directly and eliminated the importing agents. The purchaser, in this
case Wal-Mart, can easily direct the suppliers on how to
manufacture certain products so that they can be acceptable to the
consumers.[90] Thus, Wal-Mart, through direct sourcing, manages to
get the exact product quality as it expects, since it engages the
suppliers in the producing of these products, hence quality
consistency.[89] Using agents in the sourcing process in most cases
lead to inconsistency in the quality of the products, since the agent's
source the products from different manufacturers that have varying
qualities.
Wal-Mart managed to source directly 80% profit its stock; this has
greatly eliminated the intermediaries and cut down the costs
between 5-15%, as markups that are introduced by these
middlemen in the supply chain are cut. This saves approximately
$4–15 billion.[88] This strategy of direct sourcing not only helped Wal-
Mart in reducing the costs in the supply chain but also helped in the
improvement of supply chain activities through boosting efficiency
throughout the entire process. In other words, direct sourcing
reduced the time that takes the company to source and stocks the
products in its stock.[89] The presence of the intermediaries
elongated the time in the process of procurement, which sometimes
led to delays in the supply of the commodities in the stores, thus,
customers finding empty shelves. Wal-Mart adopted this strategy of
sourcing through centralizing the entire process of procurement and
sourcing by setting up four global merchandising points for general
goods and clothing. The company instructed all the suppliers to
bring their products to these central points that are located in
different markets.[90] The procurement team assesses the quality
brought by the suppliers, buys the goods, and distributes them to
various regional markets. The procurement and sourcing at
centralized places helped the company to consolidate the suppliers.
The company has established four centralized points, including an
office in Mexico City and Canada. Just a mere piloting test on
combining the purchase of fresh apples across the United States,
Mexico, and Canada led to the savings of about 10%. As a result, the
company intended to increase centralization of its procurement in
North America for all its fresh fruits and vegetables. [88] Thus,
centralization of the procurement process to various points where
the suppliers would be meeting with the procurement team is the
latest strategy which the company is implementing, and signs show
that this strategy is going to cut costs and also improve the
efficiency of the procurement process.
Strategic vendor partnerships is another strategy the company is
using in the sourcing process. Wal-Mart realized that in order for it
to ensure consistency in the quality of the products it offers to the
consumers and also maintain a steady supply of goods in its stores
at a lower cost, it had to create strategic vendor partnerships with
the suppliers.[88] Wal-Mart identified and selected the suppliers who
met its demand and at the same time offered it the best prices for
the goods. It then made a strategic relationship with these vendors
by offering and assuring the long-term and high volume of
purchases in exchange for the lowest possible prices. [89] Thus, the
company has managed to source its products from same suppliers
as bulks, but at lower prices. This enables the company to offer
competitive prices for its products in its stores, hence, maintaining a
competitive advantage over its competitors whose goods are a more
expensive in comparison.
Another sourcing strategy Wal-Mart uses is implementing efficient
communication relationships with the vendor networks; this is
necessary to improve the material flow. The company has all the
contacts with the suppliers whom they communicate regularly and
make dates on when the goods would be needed, so that the
suppliers get ready to deliver the goods in time. [91] The efficient
communication between the company's procurement team and the
inventory management team enables the company to source goods
and fill its shelves on time, without causing delays and empty
shelves.[92] In other words, the company realized that in ensuring a
steady flow of the goods into the store, the suppliers have to be
informed early enough, so that they can act accordingly to avoid
delays in the delivery of goods.[89] Thus, efficient communication is
another tool which Wal-Mart is using to make the supply chain be
more efficient and to cut costs.
Cross-docking is another strategy that Wal-Mart is using to cut costs
in its supply chain. Cross-docking is the process of transferring
goods directly from inbound trucks to outbound trucks. [88] When the
trucks from the suppliers arrive at the distribution centers, most of
the trucks are not offloaded to keep the goods in the distribution
centers or warehouses; they are transferred directly to another
truck designated to deliver goods to specific retail stores for sale.
Cross-docking helps in saving the storage costs. [93] Initially, the
company was incurring considerable costs of storing the goods from
the suppliers in its warehouses and the distributions centers to await
the distribution trucks to the retail stores in various regions.

Tax-efficient supply chain management

Tax-efficient supply chain management is a business model that
considers the effect of tax in the design and implementation of
supply chain management. As the consequence of globalization,
cross-national businesses pay different tax rates in different
countries. Due to these differences, they may legally optimize their
supply chain and increase profits based on tax efficiency.[94][failed verification]

Sustainability and social responsibility in

supply chains
Supply chain networks are integral to an economy, but their health
is dependent on the well-being of the environment and society.
[95]
Supply chain sustainability is a business issue affecting an
organization's supply chain or logistics network, and is frequently
quantified by comparison with SECH ratings, which address social,
ethical, cultural, and health footprints. These build on the triple
bottom line incorporating economic, social, and environmental
aspects.[96][97] The more commonly used ESG terminology represents
Environment, Social and Governance. Consumers have become
more aware of the environmental impact of their purchases and
companies' ratings and, along with non-governmental
organizations (NGOs), are setting the agenda, and beginning to push
for transitions to more sustainable approaches such as organically
grown foods, anti-sweatshop labor codes, and locally produced goods
that support independent and small businesses. Because supply
chains may account for over 75% of a company's carbon footprint,
many organizations are exploring ways to reduce this and thus
improve their profile.
For example, in July 2009, Wal-Mart announced its intentions to
create a global sustainability index that would rate products
according to the environmental and social impacts of their
manufacturing and distribution. The index is intended to create
environmental accountability in Wal-Mart's supply chain and to
provide motivation and infrastructure for other retail companies to do
the same.[98]
It has been reported that companies are increasingly taking
environmental performance into account when selecting suppliers. A
2011 survey by the Carbon Trust found that 50% of multinationals
expect to select their suppliers based upon carbon performance in
the future and 29% of suppliers could lose their places on 'green
supply chains' if they do not have adequate performance records on
carbon.[99]
In addition to environmental concerns, increased globalization within
global supply chains challenges human rights and worker
exploitation risks within multinational corporations including forced
labor and modern slavery. Textiles, agriculture, and manufacturing
are some of the industries with significant labor exploitation risks.
[100]
There are many different methods governments, corporations,
and NGOs use to prevent labor exploitation, including corporate
social responsibility,[101] export controls,[102] import bans,[103] and
monitoring labor standards.[104][105]
The US Dodd–Frank Wall Street Reform and Consumer Protection Act ,
signed into law by President Obama in July 2010, contained a supply
chain sustainability provision in the form of the Conflict Minerals law.
This law requires SEC-regulated companies to conduct third party
audits of their supply chains in order to determine whether any tin,
tantalum, tungsten, or gold (together referred to as conflict minerals)
is mined or sourced from the Democratic Republic of the Congo, and
create a report (available to the general public and SEC) detailing
the due diligence efforts taken and the results of the audit. [106] The
chain of suppliers and vendors to these reporting companies will be
expected to provide appropriate supporting information.
Incidents like the 2013 Savar building collapse, with more than 1,100
victims, have led to widespread discussions about corporate social
responsibility across global supply chains. Wieland and Handfield
(2013) suggest that companies need to audit products and suppliers
and that supplier auditing needs to go beyond direct relationships
with first-tier suppliers. They also demonstrate that visibility needs
to be improved if supply cannot be directly controlled and that
smart and electronic technologies play a key role to improve
visibility. Finally, they highlight that collaboration with local
partners, across the industry and with universities is crucial to
successfully managing social responsibility in supply chains.
[107]
Recent research proposes a two-phase approach for auditing
 multitier supply networks.[108] Under this strategy, buyers first audit
and drop noncompliant suppliers and then proceed to audit and
rectify the remaining ones; when auditing an upper tier, the
approach recommends selecting the "least valuable unaudited
supplier" as the next candidate for auditing.

Circular supply chain management

Circular Supply Chain Management (CSCM) is "the configuration and
coordination of the organizational functions marketing, sales, R&D,
production, logistics, IT, finance, and customer service within and
across business units and organizations to close, slow, intensify,
narrow, and dematerialise material and energy loops to minimize
resource input into and waste and emission leakage out of the
system, improve its operative effectiveness and efficiency and
generate competitive advantages". By reducing resource input and
waste leakage along the supply chain and configure it to enable the
recirculation of resources at different stages of the product or
service lifecycle, potential economic and environmental benefits can
be achieved. These comprise e.g. a decrease in material and waste
management cost and reduced emissions and resource consumption.
[109]

Components
Management components
SCM components are the third element of the four-square circulation
framework.[clarification needed] The level of integration and management of a
business process link is a function of the number and level of
components added to the link.[110][111] Consequently, adding more
management components or increasing the level of each component
can increase the level of integration of the business process link.
Literature on business process reengineering,[112][113][114] buyer-supplier
relationships,[115][110][116] and SCM[22][117][118] suggests various possible
components that should receive managerial attention when
managing supply relationships. Lambert and Cooper (2000)
identified the following components:
 Planning and control
 Work structure
 Organization structure
 Product flow facility structure
 Information flow facility structure
 Management methods
 Power and leadership structure
 Risk and reward structure
 Culture and attitude
However, a more careful examination of the existing literature [39][119]
[120][121][122][123][124][125][126]
leads to a more comprehensive understanding
of what should be the key critical supply chain components, or
"branches" of the previously identified supply chain business
processes—that is, what kind of relationship the components may
have that are related to suppliers and customers. Bowersox and
Closs (1996) state that the emphasis on cooperation represents the
synergism leading to the highest level of joint achievement. A
primary-level channel participant is a business that is willing to
participate in responsibility for inventory ownership or assume
other financial risks, thus including primary level components.[127] A
secondary-level participant (specialized) is a business that
participates in channel relationships by performing essential
services for primary participants, including secondary level
components, which support primary participants. Third-level channel
participants and components that support primary-level channel
participants and are the fundamental branches of secondary-level
components may also be included.
Consequently, Lambert and Cooper's framework of supply chain
components does not lead to any conclusion about what are the
primary- or secondary-level (specialized) supply chain
components[128] —that is, which supply chain components should be
viewed as primary or secondary, how these components should be
structured in order to achieve a more comprehensive supply chain
structure, and how to examine the supply chain as an integrative
one.
Power in supply chain management
Andrew Cox, Joe Sanderson and Glyn Watson argue that
the power resources of buyers and suppliers should be analyzed in
order to understand how a supply chain relationship operates. In
some cases, a purchasing firm may exercise more power over its
suppliers, in other cases, suppliers may have more power; yet again
there will be cases where buyers and suppliers may be
interdependent or may have no real power over each other. [129] Cox,
Sanderson and Watson have written extensively on the operation of
power regimes within a supply chain context; [130] they have
described their work for themselves as "a new perspective on
 managing in supply chains and networks". [131] Other studies of power
in supply chain relationships have looked at drivers impacting on the
potential integration of supply chains. A study by Michael Maloni and
W. C. Benton in 1998 looked at whether potential asymmetries in
inter-firm power within a supply chain could prevent the
implementation of effective supply chain execution. Maloni and
Benton note that until their research, "little power research" had
been presented in the supply chain literature. Using French and
Raven's typology of the sources of power in the context of the automotive
industry, they aimed to analyse the effects of distinct power
strategies on relationships between buyers and sellers, and upon
supply chain performance and satisfaction. Their findings showed
that:
 expert and referent power sources lent themselves to "significant
positive effects" on supply chain relationships;
 reward power had a somewhat beneficial impact
 coercive and legal/legitimate power bases, which they describe as
"completely mediated power strategies", led to "significant negative
relationships".
They concluded that "prudent use of power" can be beneficial for
both the power source and the power target.[132]
Reverse supply chain
Reverse logistics is the process of managing the return of goods and
may be considered as an aspect of "aftermarket customer services".
[133]
Any time money is taken from a company's warranty reserve or
service logistics budget, one can speak of a reverse logistics
operation. Reverse logistics also includes the process of managing
the return of goods from store, which the returned goods are sent
back to warehouse and after that either warehouse scrap the goods
or send them back to supplier for replacement depending on the
warranty of the merchandise.

Supply Chain Engineering

Although it has the same goals as supply chain engineering, supply
chain management is focused on a more
traditional management and business based approach, whereas supply
chain engineering is focused on a mathematical model based one.[134]

Digitizing supply chains

Consultancies and media expect the performance efficacy of
digitizing supply chains to be high.[135] Additive
manufacturing and blockchain technology have emerged as the two
technologies with some of the highest economic relevance.
Additive manufacturing
The potential of additive manufacturing is particularly high in
the production of spare parts, since its introduction can reduce
warehousing costs of slowly rotating spare parts. [136] Digitizing
technology bears the potential to completely disrupt and
restructure supply chains and enhance existing production
routes.[137]
Blockchain
In comparison, research on the influence of blockchain
technology on the supply chain is still in its early stages.
The conceptual literature has argued for a considerably long
time that the highest performance efficacy is expected in the
potential for automatic contract creation.[138] Empirical
evidence contradicts this hypothesis: the highest potential is
expected in the arenas of verified customer
reviews and certifications of product quality and standards.[139] In
addition, traditional supply chain has many drawbacks such as
lack of transparency and trust, and some of them can be
solved by blockchain technology.[140] The technological features
of blockchains support transparency and traceability of
information, as well as high levels of reliability and
immutability of records.[141] That helps traditional supply chain
management to be more efficient and reliable.

Systems and value

Supply chain systems configure value for those that organize the
networks. Value is the additional revenue over and above the costs
of building the network. Co-creating value and sharing the benefits
appropriately to encourage effective participation is a key challenge
for any supply system. Tony Hines defines value as follows:
"Ultimately it is the customer who pays the price for service
delivered that confirms value and not the producer who simply adds
cost until that point".[20]

Global applications
 Global supply chains pose challenges regarding both quantity and
value. Supply and value chain trends include:
 Globalization
 Increased cross-border sourcing
 Collaboration for parts of value chain with low-cost providers
 Shared service centers for logistical and administrative functions
 Increasingly global operations, which require increasingly global
coordination and planning to achieve global optimums
 Complex problems involve also midsized companies to an increasing
degree
These trends have many benefits for manufacturers because they
make possible larger lot sizes, lower taxes, and better environments
(e.g., culture, infrastructure, special tax zones, or sophisticated
OEM) for their products. There are many additional challenges when
the scope of supply chains is global. This is because with a supply
chain of a larger scope, the lead time is much longer, and because
there are more issues involved, such as multiple currencies, policies,
and laws. The consequent problems include different currencies and
valuations in different countries, different tax laws, different trading
protocols, vulnerability to natural disasters and cyber threats,
[142]
and lack of transparency of cost and profit.

Roles and responsibilities

Supply chain professionals play major roles in the design and
management of supply chains. In the design of supply chains, they
help determine whether a product or service is provided by the firm
itself (insourcing) or by another firm elsewhere (outsourcing). In the
management of supply chains, supply chain professionals
coordinate production among multiple providers, ensuring that
production and transport of goods happen with minimal quality
control or inventory problems. One goal of a well-designed and
maintained supply chain for a product is to successfully build the
product at minimal cost. Such a supply chain could be considered a
competitive advantage for a firm.[143][144]
Beyond design and maintenance of a supply chain itself, supply
chain professionals participate in aspects of business that have a
bearing on supply chains, such as sales forecasting, quality
management, strategy development, customer service, and systems
analysis. Production of a good may evolve over time, rendering an
existing supply chain design obsolete. Supply chain professionals
need to be aware of changes in production and business climate
that affect supply chains and create alternative supply chains as the
need arises.
In a research project undertaken by Michigan State University's Broad
College of Business, with input from 50 participating organizations,
the main issues of concern to supply chain managers were identified
as capacity/resource availability, talent (recruitment), complexity,
threats/challenges (supply chain risks), compliance and
cost/purchasing issues. Keeping up with frequent changes in
regulation was identified as a particular concern. [145] Complexity
within supply chains has also been highlighted in Supply Chain
Digest and by Gartner as a perennial challenge.[146][147]
Supply chain consultants may provide expert knowledge in order to
assess the productivity of a supply chain and, ideally, to enhance its
productivity. Supply chain consulting involves the transfer of
knowledge on how to exploit existing assets through improved
coordination and can hence be a source of competitive advantage:
the role of the consultant is to help management by adding value to
the whole process through the various sectors from the ordering of
the raw materials to the final product.[148] In this regard, firms may
either build internal teams of consultants to tackle the issue or
engage external ones: companies choose between these two
approaches taking into consideration various factors. [149]
The use of external consultants is a common practice among
companies.[150] The whole consulting process generally involves the
analysis of the entire supply chain process, including the
countermeasures or correctives to take to achieve a better overall
performance.[151]

Skills and competencies

Supply chain professionals need to have knowledge of managing
supply chain functions such as transportation, warehousing, inventory
management, and production planning. In the past, supply chain
professionals emphasized logistics skills, such as knowledge
of shipping routes, familiarity with warehousing equipment
and distribution center locations and footprints, and a solid grasp
of freight rates and fuel costs. More recently, supply chain
management extends to logistical support across firms and
management of global supply chains.[152] Supply chain professionals
need to have an understanding of business continuity basics and
strategies,[153] and Tramarico et al noted that several processes from
other disciplinary theories, including the resource-based view,
supply chain design and interorganizational relationships are
integral to a mature understanding of supply chain management.
[154]
A shortage of skilled supply chain professionals was highlighted
in a study by the Massachusetts Institute of Technology published in
2010, which highlighted plentiful supply of staff with "narrow
technical skillsets" but shortages in the numbers of job applicants
with "broader business skills".[155][156]
Certification
Individuals working in supply chain management can
attain professional certification by passing an exam developed by a
third party certification organization. The purpose of certification is
to guarantee a certain level of expertise in the field. The knowledge
needed to pass a certification exam may be gained from several
sources. Some knowledge may come from college courses, but most
of it is acquired from a mix of on-the-job learning experiences,
attending industry events, learning best practices with their peers,
and reading books and articles in the field.[157] Certification
organizations may provide certification workshops tailored to their
exams.[158]
University rankings
The following North American universities rank high in their master's
education in the SCM World University 100 ranking, which was
published in 2017 and which is based on the opinions of supply
chain managers: Michigan State University, Penn State
University, University of Tennessee, Massachusetts Institute of
Technology, Arizona State University, University of Texas at
Austin and Western Michigan University. In the same ranking, the
following European universities rank high: Cranfield School of
Management, Vlerick Business School, INSEAD, Cambridge
University, Eindhoven University of Technology, London Business
School and Copenhagen Business School.[159]
The following universities rank high in the 2016 Eduniversal Best
Masters ranking for supply chain and logistics: Massachusetts Institute
of Technology, KEDGE Business School, Purdue University, Rotterdam School
of Management, Pontificia Universidad Catolica del Peru, Universidade Nova
de Lisboa, Vienna University of Economics and Business and Copenhagen
Business School.[160]
Organizations
A number of organizations provide certification in supply chain
management, such as the Council of Supply Chain Management
Professionals (CSCMP),[161] IIPMR (International Institute for
Procurement and Market Research), APICS (the Association for
Operations Management), ISCEA (International Supply Chain Education
Alliance) and IoSCM (Institute of Supply Chain Management). APICS'
certification is called Certified Supply Chain Professional, or CSCP,
and ISCEA's certification is called the Certified Supply Chain
Manager (CSCM), CISCM (Chartered Institute of Supply Chain
Management) awards certificate as Chartered Supply Chain
Management Professional (CSCMP). Another, the Institute for Supply
Management, is developing one called the Certified Professional in
Supply Management (CPSM)[162] focused on the procurement and
sourcing areas of supply chain management. The Supply Chain
Management Association (SCMA) is the main certifying body for
Canada with the designations having global reciprocity. The
designation Supply Chain Management Professional (SCMP) is the
title of the supply chain leadership designation.
Topics addressed by selected professional supply chain certification
programmes
The following table compares topics addressed by selected
professional supply chain certification programmes. [162]
Awa Ch Su Int Inst Th Int A Th IntIn Inst Int Ch
rdin artpp er itut e ernme e ernsti itut ern art
g er ly na e As atiric As atitu e ati er
ed for on on for on
bod Ch tio so an so te ed
Ins Sup al al Sup al
y titai na ply cia Su So cia Su of ply Su In
ut n l Man tio pplcie tio pplSu Man ppl sti
e M In age n y ty n y pp age y tut
ofan sti me fo Ch of fo Ch ly me Ch e
Prag tu nt ( r ainTr r ainCh nt ( ain of
oc e te ISM Op Ed an Op Ed ai ISM Ed Su
urm fo ) er ucasp er uca n ) uca pp
em tio tio tio
en r Cer ati ort ati M Cer ly
en n n n
t&
t Pr tifi on ati
Alli
on an
Alli tifi Alli Ch
Su As oc ed s ancon s ancag ed anc ai
pp so ur Pro M an
e (I M e (Ie Pur e (I n
ly cia e fes an SC d an SC m cha SC Ma
(C tio m sio ag EA Lo ag EA en sin EA na
IP n en nal e ) gis e ) t g ) ge
S) (S t in m Ce tic m Ce (I Ma Ce m
C an Su en rti s en rti OS nag rti en
M d ppl t fie (A t fie C er fie t
A) M y (A d ST (A d M) (CP d (CI
Su ar Ma PI Su &L PI Su M) De SC
pp ke nag CS ppl ) CS ppl ma M)
ly t em ) y Ce ) y nd aw
Ch Re ent Ce Ch rti Ce Ch Dri ar
ai se (CP rti ain fic rti ain ve ds
n ar SM fie Ma ati fie An n ce
M ch ) d na on d aly Pla rti
an (II Su ge in Pr st nn fic
ag P pp r Tr od (C er at
e M ly (C an uc SC (C e
m R) Ch SC sp tio A) DD as
en Ce ai M) ort n P) Ch
t rti n ati an art
Pr fie Pr on d er
of d of an In ed
es Su es d ve Su
si pp si Lo nt pp
on ly on gis or ly
al Ch al tic y Ch
(S ai (C s M ai
C n SC (C an n
M Sp P) TL) ag Ma
P) ec e na
ial m ge
ist en m
(C t en
SC (C t
S) PI Pr
an M) of
d es
Ce sio
rti na
fie l
d (C
Pr SC
oc M
 ur
e
m
en
t
Pr
of
es
si
on
al
(C
PP
) P)
Procu
Hig Hig
reme High High High High Low Low High High High Low High
nt h h
Strat
egic Hig Hig
sourci h
High Low High Low Low Low Low Low Low High
h
ng
New
produ
ct Hig
devel
Low High High Low Low Low Low Low Low Low High
h
opme
nt
Prod
uctio
n, lot Low Low Low Low Low High High Low High Low High High
sizin
g
Qualit Hig Hig
y
High High Low Low High Low High High High High
h h
Lean
Six
Sigm
Low High Low Low High Low Low High Low Low High Low
a
Inven Hig High Hig High High High High High High High High High
tory h h
man
age
ment
Ware
house
man Low Low Low Low Low High Low High High Low Low High
age
ment
Netw
ork
desig
Low Low Low Low High High High High Low Low Low Low
n
Tran
Hig
sport High Low Low High High High High High High Low High
h
ation
Dema
nd
mana Hig
geme Low High High High High High High High Low High High
h
nt, S
&OP
Integ
Hig
rated High Low High High High Low High High High High High
h
SCM
CRM,
custo Hig
mer Low Low High High Low Low Low High Low High High
servic
h
e
Pricin Hig
g
High Low High High Low Low Low Low Low Yes High
h
Risk
mana Hig Hig
geme h
High Low Low Low High Low High Low High Low
h
nt
Proje
ct
Hig
mana Low High Low High Low High Low High Low High High
geme h
nt
Leade Hig High Hig Low High Low High Low High High High High
rship, h h
peop
le
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 age
ment
Tech
Hig
nolo High Low High High High Low High High High High High
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acco h h
untin
g

See also
 Beer distribution game
 Demand-chain management
 Military supply chain management

References
Further reading
 Ferenc Szidarovszky and Sándor Molnár (2002) Introduction to Matrix Theory: With
Applications to Business and Economics, World Scientific
Publishing. Description and preview.
 FAO, 2007, Agro-industrial supply chain management: Concepts and applications.
AGSF Occasional Paper 17 Rome. Archived 2010-05-25 at the Wayback Machine
 Haag, S., Cummings, M., McCubbrey, D., Pinsonneault, A., & Donovan, R. (2006),
Management Information Systems For the Information Age (3rd Canadian Ed.),
Canada: McGraw Hill Ryerson ISBN 0-07-281947-2
 Halldorsson, A., Kotzab, H., Mikkola, J. H., Skjoett-Larsen, T. (2007). Complementary
theories to supply chain management. Supply Chain Management, Volume 12 Issue
4, 284–296.
 Hines, T. (2004). Supply chain strategies: Customer driven and customer focused.
Oxford: Elsevier.
 Hopp, W. (2011). Supply Chain Science. Chicago: Waveland Press.
 Kallrath, J., Maindl, T.I. (2006): Real Optimization with SAP® APO. Springer ISBN 3-
540-22561-7.
 Kaushik K.D., & Cooper, M. (2000). Industrial Marketing Management. Volume29,
Issue 1, January 2000, Pages 65–83
 Kouvelis, P.; Chambers, C.; Wang, H. (2006): Supply Chain Management Research
and Production and Operations Management: Review, Trends, and Opportunities. In:
Production and Operations Management, Vol. 15, No. 3, pp. 449–469.
 Larson, P.D. and Halldorsson, A. (2004). Logistics versus supply chain management:
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Vol. 7, Issue 1, 17–31.
 Simchi-Levi D., Kaminsky P., Simchi-levi E. (2007), Designing and Managing the
Supply Chain, third edition, McGraw-Hill
 Stanton, D. (2020), Supply Chain Management For Dummies, Second Edition. Wiley
New York. ISBN 978-1119677017
 Houlihan, J.B. (1985), "International Supply Chain Management", International
Journal of Physical Distribution & Materials Management, Vol. 15 No. 1, pp. 22–
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 Kirk A. Patterson and Curtis M. Grimm and Thomas M. Corsi (2003). "Adopting new
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