Explain the transition from managing distribution channels to modern day supply chain management systems.

Question

What will be an ideal response?

Answer 1

Distribution channel is the set of firms that facilitates the movement of goods from producers to consumers. Earlier, many producers made most goods in-house and one of the key concerns was distribution. Since then, production outsourcing has grown significantly. Many firms do not physically produce their branded products at all. They rely on contract manufacturers to get the job done. Other firms that still produce in-house rely on their suppliers to provide an increasingly higher percentage of the value-added. Therefore, the new challenge is how to manage the longer distribution channel-more specifically, the distribution from suppliers (and contract manufacturers) all the way to consumers.Consequently, a new term, ''supply chain,'' has been coined, and it has now almost replaced the old-fashioned ''distribution channel.'' To be sure, the focal firm has always dealt with suppliers. Strategy guru Michael Porter labels this function as ''inbound logistics'' (and the traditional distribution channel as ''outbound logistics''). In a broad sense, the new term ''supply chain'' is almost synonymous with ''value chain,'' encompassing both inbound and outbound logistics.Business logistics tends to be tactical and lacks prestige. However, if supply chain is value chain, then supply chain management essentially handles the entire process of value creation, which is the core mission of the firm. Consequently, supply chain management has now taken on new strategic importance and gained tremendous prestige.One indication that supply chain management has gained traction is that instead of being obscure players, leading supply chain management firms show substantial contribution to the worldwide GDP. Modern supply chains aim to "get the right product to the right place at the right time-all the time."