Logistics and Supply Chain Management - Essay Example

?Introduction Supply chain has recently become a critical entity essential to the organization’s performance measurement. This has resulted to increased attention from both researchers and business practitioners. Pursuant to this, a lot has been discussed on the role played by these metrics as a yardstick for determining the success of any organization on the strategic, tactical and operational planning and control front. The recent trends in SCM attest to the revolution SCM has undergone in the past decade and the rise in the number of organisations seeking to improve their performance and ensuring success (Robert, Ernest 2002). From a review of numerous literature relevant to study, there exists three types of supply chain. These include a lean supply chain, an agile supply chain and lastly a hybrid supply chain. This study will seek to discuss the growing supply chain relationship in today’s supply chain management while analysing the various established relationship management models and exploring both the strategic and operational considerations that are extremely essential for enabling a relationship posture that is appropriate within the supplier (Christopher 2004). Additionally, the study explores the various emerging concepts of lean supply management while discussing the importance of both the efficiency and effectiveness brought about by a lean approach and consequently proposing a general approach an organization can initiate, develop and sustain. The growing importance of the supply chain relationship in today’s supply chain management Numerous studies have observed a highly interesting trend amongst the leading companies in the world. The companies are discovering a somehow very powerful new source of competitive advantage in the market (Christopher 2004). This is what is increasingly gaining popularity as the supply-chain management. Supply chain comprises of all the integrated activities responsible and that can be traced to the final product in the market and which determines customer satisfaction. Supply chain management by the nature of its existence heavily depends on relationships and connections. In the context of supply chain management, the term relationship implies a lot. This may include strategic relationship, internal relationship, and transactional relationship amongst many more others. What has made supply chain necessary is the benefit that is derived from supplier relationships, most notably the increasing value and supply chain cost minimization. Additionally, the need by most companies to gain competitive advantage has made maintaining supply chain relationship very serious (Robert, Ernest 2002). The programs related to supply chain management integrates topics from all the departments of the organization which include the manufacturing operations of the company, purchasing of the company’s products, and transportation of the sales, in addition to, physical distribution into a unified program (Robert, Ernest 1989). For supply chain management to be considered successful, it must coordinate and ensure there is integration of all the above stated activities into a process that is seamless (Robert, Ernest 2002). The supply management team should further, in addition to, embracing link all the partners in the chain. Consequently, in addition to, the various departments within the organization, the other partners include vendors, carriers, information system providers and third party companies. The most fundamental objective of the supply chain management has always been to add value. Supply Chain Management has been transformed into a tool that is essential for accomplishing corporate strategic objectives (Financial Executive 2002). Amongst these would include reducing working capital, accelerating cash-cash cycles, taking assets off the balance sheet and increasing inventory turns amongst and most importantly monitoring average annual sales (Carlisle & Parker 1989). Supply chain management has in the recent past become top managements new main focus area. In light of the important role Supply Chain Management contributes to the success of any organization, it is, therefore, necessary that firms make right decisions as regards the suitability of the various systems. In this light, in order to take care of the various critical challenges as regards the role effective supply chain management plays strengthening relationships with suppliers and consequently on managing working capital ensuring effective working capital management. Various studies indicate that the best practices on supply chain provide that company management should seek to form relationships that are closer and long term in nature in order to ensure that the long term values to both parties are delivered (Carlisle & Parker 1989). A lot of emphasis has thus been given to the importance of relationships with key suppliers in increasing value and making attempts reduce the total supply chain spend (Robert, Ernest 1989) Before a company decides how to economical distribution centres and new service supply chain management, many factors need to be considered. These include the required levels of customer service, the optimum location, the policies on stock holding and the equally EDP system. In the context of the organization itself, the supply chain refers to numerous organization’s functional areas (Christopher 2004). Amongst these include the supply chain management-related activities like the inbound and outbound transportation, warehousing and most importantly inventory control. Additionally, Issues to do with sourcing, procurement and supply management also fall under the boundaries of supply chain. Amongst other components related to supply chain management process include forecasting, scheduling, production panning, issues, to do with order processing and customer services (Carlisle & Parker 1989). Worth importance to note is that a supply chain embodies the information systems that play a critical role monitoring all the mentioned activities. From the above, we are justified to state that an organizations supply chain is composed of all the activities that are related to the process of moving goods right from the raw material stages and up through to the end user of the product who in most cases is normally the customer (William 1997). It is worth noting that both transparency and performance have proved to be particularly valuable to organizations seeking to become market leaders. This has prompted many of the companies to start recognizing the value Strategic Performance Management plays as regards nurturing supplier relationships, through a culture that is based on performance. A literature review of related articles to the study indicates that amongst the reasons propagated for this business process is the realization that a significant increase in productivity can only be realized from managing various factors in the organization which include relationships, information flow and material flow across enterprise boarders. Pursuant to this, amongst the best definition of supply chain management that has ever been offered is that Supply Chain Management, is that it is the delivery of physical goods to the final consumers, in addition to, the enhancement both customer and economic value through harmonization of management of the flow of tangible goods and the associated information right from sourcing up to consumption (Tyndall, Gopal, Partsch, & Kamauff 1998) Thus, it is quite evident from the last part of that definition that the achievement of real potential of supply chain management requires integration of both internal entities of the organization and external aspects of an organization (William 1997). These include the suppliers, the carriers, the distributors, the customers and also the ultimate consumers. All play a central role in what we can refer to as the extended supply chain. In this context, it is obvious that the role of the extended enterprise is to do a better job exemplified through service to the ultimate consumers of their products. The company can employ the use of custom built reports and dashboards to maintain and nurture supplier relationships, which ensures the, supply chain is of world class standard (Robert, B, Ernest 1989) With superior services, company is assured of an increased market share which in turn translates into attaining of a competitive advantage like lower warehousing and the costs of transportation, in addition to others like a, reduction in inventory levels, reduced wastes and also lower transaction costs. In all this aspects, what comes out clearly is that the customer plays a key role in not only quantifying, but also communicating the value of the supply chain (Tyndall, Gopal, Partsch, & Kamauff 1998). This is confirmed by the Shrawan Singh, who is the vice president of the integrated supply chain management at Xerox. Through his assertion that if customer satisfaction can be linked in terms of revenue or growth in profit only when measuring satisfaction that is associated with what supply chain can do for the customer (Ford Gadde, Hakansson, Lundgren, Snehota, Turnbull, & Wilson 1998). This then gives the leeway for attaching the customer values to both the balance sheet and the profit and loss account. With the complexity in the global supply chains coupled by a high number of in putters, barriers in language and long distances, only Strategic Performance Management system provided for by a supply chain can help manage all this (Robert, Ernest 2002). Competitive Advantage In the very demanding business environment experienced in the current market today, being slow and steady cannot get an organization gain any competitive advantage compared to its market competitors. The managers of today have recognized the fact that when the company’s products gets to their customers faster, it gives the company a competitive advantage over their competitors, which as a result, makes the company attain or rather improve its competitive position in the industry. Thus in order to remain competitiveness, companies need to seek for new solutions that are relevant to supply chain management issues, like the modal analysis, load planning, supply chain management, design of distribution network and also route planning (Manugistics, Inc. Brochure 2002). Additionally, it would be essential for firms to face challenges associated with the corporate sector and, which impact the, supply chain management like outsourcing or reengineering globalisation. Numerous studies have indicated that getting products to the market and to the customer faster is a key factor for increasing sales (Dyer, Cho, & Chu 1998). This gives the company a substantial profit advantage that is traced to the longer time the product is in the market while the competitor is not in the market. This is because being there earlier enables a company to get access to many orders hence getting a larger market share. The studies have also indicated that by a company having the ability to deliver a product faster to the customer has an impact in determining either the success or the failure of a sale. It is thus clear that Supply Chain Management plays an essential role in moving goods faster to the market and to the consumers thus the need for strong chain relationship in today’s Supply Chain Management (Ford, Gadde, Hakansson, Lundgren, Snehota, Turnbull, & Wilson 1998). Only adopting a supply chain management approach, can help in overcoming the various barriers that have for a long time been preventing the development of strong relationships. Consequently, it is indeed justifiable that performance management can be play a critical role in reducing bottom line spend and also help in optimizing the supply chain. This probably explains why a substantial number of senior finance officers have both agreed that supplier relationships are indeed becoming a corporate priority in most organizations (Financial Executive, 2001). This replays just how valuable role of supply chain finance is in managing working capital. Well established Relationship management models Most of the established relationship management involves tracking the customer and supplier habits and the creation of a personalized marketing that is based on customer information, which is in, most cases stored in databases. Most of The relationship management models involve information technology since complex data management form an integral part of any supplier relationship. There are three types of relationships. These includes:- 1. Vertical relationships: Refers to the traditional linkages between companies that exist in the supply chain such as the distributors, the retailers, the manufacturers and suppliers of raw materials (Manugistics, Inc. Brochure 2002). 2. Horizontal relationship: This is the official business arrangement between firms occupying parallel positions in the supply chain. An example would be when we have two ocean carriers dealing with either similar or different goods but sharing the same ship capacity. 3. Full collaboration relationship: The business arrangement between firms which occupy both the vertical and parallel positions in the supply chain. Suppliers Vertical Relationship Horizontal relationship Full Relationship Source: C. John Langley Jr. There exists numerous ways in which the spectrum of supplier relationships can be defined. Most range from the traditional relationships fast forward to partnerships and lastly alliances. A review of business and academic literature reveal a number of approaches and models that have always been used to manage supplier relationship (Dyer, Cho & Chu 1998). This study will enable us have an understanding of the three models. The models present a representation of the various options that are available for firms. They seek means of determining the most appropriate way of initiating and managing supplier relationship. Additionally, it enables understanding on how a combination of the nature of the product and the environment influence how the appropriate relationship model is selected. 1. Partnership Model Partnership Model was identified by Stock and Lambert who suggested that there are four different types of supplier relationships which ranges in different aspects right from arm’s length to numerous others like partnership, joint ventures and vertical integrations (Dyer Cho & Chu 1998). Despite most relationships being arm’s length, where the suppliers offer standard products and services to different customers, firms are advised to pursue means of partnering with the suppliers. This in Lamberts own terms is a business relationship that is tailored to and is based on mutual trust, shared risk, openness. Most important to note is that it has shared rewards. This results in the business experiencing a greater performance than it would have achieved in the event of the two firms working initially on the absence of the partnership. Gadde & Hakansson (1994), states that there are three types of partnerships which the firms can pursue with the suppliers; Type I: It arrangement makes both organizations accept each other as partners and enables them to coordinate their activities and planning in a short term manner involving only one aspect within the entity. Type II: Type II partnership is characterized with the integration of activities between the partnering organizations and on the front of long term prospects involving various divisions or aspects of the organization (Dyer, Cho & Chu 1998). Type III: It is of the partnership allows for a significant level of integration between both organizations while allowing each to have an understanding of the other part of its own organization. However, what is worth noting is that developing partnerships requires a significant investment of both partnering party’s time and resources (Sheth & Sharma 1997) 2. Supplier Portfolio Management Model There has been a push in both the industry and the academic circles for movement of most of the supplier relationship from the perspective of arm’s length to that of long-term strategic partnerships; which ignores the various risks and costs that are associated with the development of an extensive network of supplier partnerships (Archer 2003). The approach applies four types of the buyer to supplier relationships, which comprise of, the market exchange captive buyer, the captive supplier and the strategic partnership. There exists other supplier relationship models which range from the simple two dimensional like the Exit/Voice Model to the extremely sophisticated types of models like the Cox’s model which proposes for evaluation and management which is based on the power of the buyer in relation to that of the supplier (Archer 2003). The exit/voice model recognizes the fact that most business organizations face the challenge of devising means and ways of engaging with their suppliers and the means of engaging with them. The members of an organisation are presented with the exiting from the relationship with the company or alternatively exiting from the relationship. The Cox model, on the other hand, relates the passes before the occurrence of some event. The model proposes that a unique effect of any unit is multiplicative given considerations with respect to time (Gadde & Hakansson 1994). 3. The Payne’s Five Forces Model This model gives emphasis to the five core processes in Customer Relationship Management like the strategy development process, the multichannel integration process, the value creation process, the performance assessment process and most importantly the information management process (Tyndall, Gopal, Partsch, & Kamauff 1998). This can be summarised into strategic CRM, operational customer relationship management CRM, strategic CRM and lastly analytical CRM. Question 2: Emerging concepts of lean supply management Lean supply is a system of set organizations, which are linked, by upstream and downstream, product flow, services and information significantly works together in reducing cost and waste. This is done by the effective and efficient assembling what is needed in order to meet the individual customer (Ford, Gadde, Hakansson, Lundgren, Snehota, Turnbull, & Wilson 1998). The application of this leanness is widespread and is evidence across a chain of organizations; which are then interconnected to each other and possess a tendency of satisfying the customer fully (Cousins 1999). Lean supply is often more focused on qualitative product delivery to a customer at the least possible minimal price; this should also be done at the right time. This is then equally achieved by means of continuous flow improvement and the general elimination of waste along that activity that is needed to deliver the product to the respective customer. Many people tend to view the principal of lean from a different approach but what is of importance is that. Lean always applies in a way that maximizes the targeted results at the end of the process. For there to be leanness in the supply chain, both the customer and the general supplier should have a common goal and a means to an end of the same, which can be materialized by transparency and collaboration between the two parties (Davis 2003). The buyer is always in a position to willingly share information on cost and anything of interest to him. This places the buyer in a position to share losses in case of any unlikelihood in a way not anticipated and unplanned. Over the past years but most notably over the last 15 years, there has been a tremendous paradigm shift in how buyers and sellers should relate. Most scholar argues that the relationship between buyers and sellers should be put in a way that product categorization using the supplier risk and the general impact on profit as the basis (Davis 2003). The Lean Supply: Effectiveness and Efficiency Effectiveness is the outcome of a commodity or service being improved while efficiency is the general minimization of both price and cycling time. To determine the effectiveness and efficiency of the lean supply management, we need first to measure its general impact on price and the quality (Tyndall, Gopal, Partsch, & Kamauff 1998). Lean supply also is clearly highly useful when there is a high volume, where the demands are predictable according to certainty in supply. For the purpose of this study, we will use the Toyota case study. Toyota’s Global Competitive Advantage case study The global competitive advantage of Toyota global is based on the company’s lean production system. The system of Toyota is dependent on the human resource management policy which emphasises on stimulation of employee creativity and maintenance of loyalty, in addition to having a network, of highly efficient suppliers and manufacturers of its manufacturing components (Holweg & Pil, 2004). The production system of Toyota is not only about the pull or flow, load levelling but is instead giving most focus on profit generation and customer satisfaction. This is achieved through production of the highest quality that is attainable at the lowest cost possible and within the shortest lead time while at the same time ensuring that they develop talent and skills of its employees through a rigorous routine and a discipline that is well specialised for solving problems. The aim of the company is anchored on the just in time principle, which revolves, around making and delivering in the right amount and at the appropriate time to the customers (Fisher 1997). Additionally, the company has given emphasis on the notion of having continuous improvements by standardization and eliminating waste through improvement of quality, reduction of costs, lead time, productivity, and morale amongst the other needed metrics. Critical Importance of Efficiency and Effectiveness That the Lean Approach Brings About In recent past, there has been a sustainable trend of competitive advantage, which is significantly, gained when the relationships between firms and their suppliers are improved. This competitive advantage in the modern market gives managers a lot of credibility in how they deal their suppliers in the market. Taking an example of a car which has over 15000 parts and most of which are produced outside, we can, therefore, see the need to determine the appropriate supplier relationship in the management approach so as to gain significantly the desired competitive advantage both in terms of price and quality (Tyndall, Gopal, Partsch & Kamauff 1998). There is just no way that the need for supplier relationship management can just be overemphasized more than it is now. It is extremely clear that, in today's world, there is full outsourcing and general globalization. For us to determine the effectiveness and efficiency the lean supply management brings about, we have to measure the impact it has on products price, the time cycle and most importantly the quality of the materials produced over time in the different firms adopting the approach. With respect to this, we will be looking at the example of General Motors Framingham assembly and Toyota, a study conducted on both countries indicated 135 defects for every 100 cars produce by General Motors and as compared to 45 from Toyota’s Takaoka assembly which is a lean producer (Christopher 2004). Despite there being arguments about the various limitations of lean supply, most researchers tend to agree that lean supply is most useful when the production is high, and there is predictable and certainly in demand and supply. The Initiation development and sustainability of lean supply management Initiation Before any form of lean supply management can be said to be initiated, the general production execution accuracy has to first of all fall in 80-85% range and 95% range on the side of inventory accuracy (Cousins 1999). Ensuring lean supply management is no uncomplicated concept and its implementation can easily be disrupted. So what needs to be done before lean is initiated? The top management needs to come together and utterly reach in concise agreement on the need to implement lean. A facilitator is introduced in the picture that will help accordingly, the managers thereafter together with the facilitator then clearly decides on which target assembly and supply chain to implement (James 1999). It is essential that this is done as lean implementation can easily be disrupted and as such calls for numerous phases to do the implementation. After these, a core team should be put in place that has to compromise of a manager, first ties suppliers, the sub tier suppliers and the inclusion of the lean facilitator (Sheth Sharma 1997). It is the job of the facilitator to train the other team members about lean, making assumptions that they do not understand the requirements and means of implementing the same (Gadde & Hakansson 1994). The emerging concepts of lean supply management based on published scholarly journal articles The issues of Supply Chain Management frameworks, challenges and form part of the second largest area in the growth that has been recently experienced in the supply chain field (Cousins 1999). Despite the concepts of supply chain being in either one form or another for several decades, the actual value of SCM has not until recently been realised with the emergence of global supply chains and advances in information technology (Tyndall, Gopal, Partsch & Kamauff 1998). The increased development and mechanization on the supply chain has in the recent past become complex. Supplier Alliance There has been an increase in the number of publications in this field which can be exemplified by the emergence in general trends within the industry characterized with a shift from the single transactions and the contact based relationship towards a relationship that is more long term between the two parties (Christopher 2004). This development between buyers and sellers has been seen to offer opportunities that create a competitive advantage for the partnering firms. Caution, however, need to be taken due to the increased number of firms those attempts to adopt a relationship that proves to be more collaborative and trusting between the partnerships. Substantial activity is still expected during the coming year since most companies especially from the developing countries are going global (Davis 2003). World Wide Web and E- commerce This area can be classified as the fourth largest area experiencing growth in the recent past. The growth in the internet has resulted into a revolution in the communication process making information available instantaneously globally hence leading to a rapid and efficient co-ordination of various activities like planning of production, material management, distribution, forecasting of a supply chain which has been important in enabling and empowering the supply chain (Stock & Lambert 2001). This has in the process led to the emergence of both new business to business supply chains and also business to consumer supply chain. This with the emergence and gaining of popularity of several techniques like e-Tender and e-Auctions has facilitated the speeding of the supply chain. We can, therefore, conclude that E-commerce has impacted in various ways on supply chain management in ways including cost efficiency (Sheth & Sharma 1997). Additionally, the changes in the distribution system, shipment tracking, customer orientation, freight auditing labelling, automated shipping documentation and online shipping inquiry amongst others has enabled a review of E-fulfilment and a channel of distribution that is multi-channel (Tyndall, Gopal, Partsch & Kamauff 1998). With the continues development and fascinating areas which holds unpredictable and continued inventions in the field of information communication technology, further developments are still expected in the supply chain taking various forms of World Wide Web that is based on the Supply Chain Management applications (Stock & Lambert 2001). A General Approach for an Organization to Initiate, Develop and Sustain Lean Supply Management Development The development can be done using three major steps. These include assessing the current state, developing a future state map and lastly implementation. General assessment of the current State; Here the core team members proceed and provide an assessment of the current supply chain and determine the non-value adding processes. Spaghetti mapping is then used for people movements the mapping of the information flow across the entire supply chain will be produced by the systems flow chatting. The next stage is then the mapping of the future state, which is done after all the loop holes are closed and eliminated (Stock & Lambert 2001). Development of a future state map: The map developed is meant to describe, how the supply chain will look in the near future this is in line with meeting the set goals and targets.. A future state map is then developed foe and every level of the entire supply chain. With The help macro current state value steam map, with then all individual draft future state maps for the supply chain level identified this can then allow the formation of a draft macro future state map (Stock, Lambert 2001). The last step is implementation: Now that, the entire core team possess ideas of how the supply chain is supposed to look like in the near future, calls for the changes noted to be implemented. Team’s projects are then formed effectively and project leaders assigned to these formed teams this is done across the entire supply chain. There are then what to do and clearly how to go about it. A time should also be set and from time to time. The core team is supposed to meet and find out if their general objectives are being met (Stock, Lambert 2001) A time line is put in place with the future Macro-FSVSM serving as a guide which would then be used for establishing whether the objectives have been met. Sustainment For sustainment purposes, there would be a need for a placing of a lean expert in every department who would from time to time discuss with core team members and assess areas requiring improvements (Stock & Lambert 2001). The management, on the other hand, from time to time review organisation performance and measures whether the goals have been met. Conclusion The importance of having a lean supply in the supply chain competitiveness’ cannot be overemphasized. Lean Supply Sustainment, therefore, is a critical part of system sustainment, as this brings chain competitiveness (Christopher 2004). It, however, should be noted that lean supply style cannot fit all organization hence the need for a paradigm shift towards a lean six sigma since a lean supply management is best used alongside another quality management tool. References Christopher, M 2004, Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service (Financial Times Management). Robert, B. H. Ernest, L 2002, Introduction to Supply Chain Management Supply Chain Management. William, C 1997, the Basics and Beyond, the St. Lucie Press/Apics Series on Resource Management James, E 1999, Basics of Supply Chain Management. 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