Benefits of a Global Organizations Controlling Supply Chain - Literature review Example

? Benefits of a Global Organizations Controlling Supply Chain Introduction Most of the organization are forced with a hard task of not only ensuring that they produce high quality products to increase the slow volume but also by maintaining sufficient number of its own supply chain as a way of sustaining competitiveness within the market. Organization such as Coca-Cola have developed numerous strategies of dealing with the issue of control and maintenance of the supply chains in accordance to the corresponding business comparatives considering the presence of the already existing rival companies and the environment in , which the numerous stores outlets are located. According to Caves (2007) any business, which has showed potentiality of having varied number of chain stores located in different parts of the world is capable of achieving adequate economies of scale such as timeliness, humble use of global resources and market dominance amongst other aspects, which can only be relevant to the maintenance of supply chain. Globalization and FDI The globalization of commerce has a major impact on modern business (TOMAR, 2009). Globalization affects the way business is carried out and the geographical area where a business can operate. With globalization, even small businesses are able t operate in the global arena, which then leads to Foreign Direct Investment. Foreign Direct Investment affects and in turn is affected by the supply chain. It also affects the supply chain decisions which a firm is likely to make with regard to whether they are going to manage their entire supply chain or if they are going to outsource the supply chain to a third part. With regard to choosing a supply chain model, businesses look for the model which will offer them strategic edge over their competitors. It is therefore not a matter of choice, but it is a matter of choosing the most efficient way of survival in a marketplace that has been made even more competitive by the existence of globalization. Issues of competitive advantage simply entail an organization being able to dominate the market over other firms who trade in the same line of product. Firms that have numerous numbers of chain stores in different countries have got potentials of achieving increased sales volume. Besides proper choice of the location of an industry is the most practical way of distribution of production cost. Therefore, with very minimal cost of production a company can easily enjoy the competitive advantage. Moreover, with several advantages associated with supply chains, the company would be left with principal mandate of concentrating on other internal aspects of production, and this makes appropriate benefit to the maintenance of supply chain by an organization (working mother, 2001). The Coase Theory of Transactions Costs and Decisions Making The Coase theory postulates that in the absence of transactional costs, businesses would be able to share the property space without having to worry how resources are allocated (Jager, 2008). In regard to the supply chain, what this means is that if there are no negotiation costs between two firms which are at different levels in a single supply chain, the two firms would not mind continuing to depend on each other to complete the supply chain. The Coase theory was developed by Ronald Coase who tried to understand the free markets and why regulations are not necessary. According to the Coase theory, an organization would only then choose to control all its supply chain if there were costs of negotiating the terms of service with other firms in the supply chain. If these costs of negotiation do not exist, the costs of outsourcing some of the supply chain would not hinder a firm from outsourcing. In fact, according to the Coase theory, where transactions of negotiations do not exist, the two (or more) firms in a supply chain would naturally gravitate to the most efficient relationships with the most efficient supply chain. This implies that in the absence of negotiation costs, firms would be better off not managing their own transactions because the other parties of the supply chain would end up offering much more efficient and cost effective supply chain models. The Williamson theory of organizational efficiency also tried to discuss this by looking at how organizations make transactional choices. Williamson argued that decisions making in a firm is controlled by the consideration of transaction costs (Pfeffer, 1997). He argued that transactions and transactions costs can be used to understand organizations. Williamson also considered a difference between the economic man and the organization man, drawing that the economic man would be more rational with regard to transaction costs. He also argued about the bounded rationality nature of people and how bounded rationality may lead to decisions which would favor less efficient transaction models over the most efficient models. This theory can be used to understand, for instance, why an organization may choose to manage its entire supply chain network; even in cases where this is not the most efficient model for the firm. The Williamson theory of firms is important in understanding how human are likely to make inefficient decisions with regard to business opportunities. Examples There are firms which have chosen to manage their entire supply chain. A good example is Walmart. Walmart looks at its supply chain just like a process of delivering the product to the consumer, but as a value chain. In this regard, Walmart has total control of the supply chain. Although the firm is just a retail store and does not manufacture or produce its own good, Walmart has used the power of negotiation to make sure that it has control of the supply chain even at the production level. Coca cola is another firm that has chosen a supply chain system that is completely different from the Walmart model although coca cola is a manufacturer, it depends a lot in third parties to deliver the product to the end consumer. This model works for coca cola and the firm does not have to incur the detailed costs of delivering the product to the market. It also offers and efficient way to deliver the product to the market. The coca cola supply chain decision can be seen as being affected by the Coase theory, where the absence of negotiation costs makes it possible for the firm to outsource the supply chain and still remain efficient. Supply chain adds value to the customer management With respect to the above illustration, there is improved optimization in of service delivery based on total quality production while ensuring that the best is offered in maintaining the already available customers across the nations while at the same time trying to attract the other potential customers with an imminent idea of generating more revenue (Bodegraven & Ackerman, 2007). With respect to the above, supply chain management has appropriately enhanced the code of ethics leading to the practice of unilateral code of conduct in all relevant outlets, and this maintains production cycles and increases sale volume for the highest possible returns (Bodegraven & Ackerman, 2007). The factors of logistic management must conform to the multinational supply chain at the best interest of the customers for maximum sales across the international borders. Besides, since business has no longer become an individual enterprise affair, appropriate coordination and integration is expected together with other relevant business in place so as to ensure maximum sustainable comparatives (Bodegraven & Ackerman, 2007). Supply chain promotes organizational competitive advantage Several illustrations have indicated how multinational companies can basically achieved relevant and numerous benefits from by appropriate practice and implementation of supply chain across international boundaries. As a matter of business viewpoint and the exploration of companies that are able to operate business across the boundaries, it becomes very much easier in controlling the supply chain management. There is clear indication that several competitive advantages can be achieved through perfection of the supply chain (Peng, 2011). Helps in the assessment of international business environment It is clear that organizations that do business across the international boarders must be coupled with problems such as the issues of customs and excise duties associated with imports and exports. These definite problems are sufficiently risks that an organization would consider as environmental challenges outside their local trade boundaries. For such reasons, supply chain would offer the best assessment solution in determining how to deal with the presence of such risks (Webster & Hamilton, 2012). Consequently, such a cluster of firms are considered to be at the upper stance of improving service delivery, enhanced productivity and facilitates the rate of global technological innovation, which is at the best interest of multinational supply chains to the reduction of cost while improving global competitiveness (Mattli &Woods, 2009). In the new competitive environments, knowledge expertise and information are vital organizational resource and are the targeted source relevant to the competitive advantage (Hitt, Ireland, and Hoskisson 1999). A company dealing in minerals trade will often have its supply chains distributed in countries with abundant source of minerals or in areas where there is available market as a way of improving its economies of scale (Sparrow, 2005). The merit of lower cost of production Due to setting up of multinational companies in areas or locations, which are perceived to have the potential supply of either raw materials or the other resources such as adequate market. These often ensure that the cost of production is down to the least point of unit coast of each product in all supply chains. Supply chain, which basically constitutes production, processing, supply and consumption of products, is a subject of minimal waste generation when it comes to the multinational supply chains. This is because there is maximum distribution of risks and costs, which is obviously higher when it comes to local based manufacturers. The possible advantage is the effective and efficient use of resources leading to the possible reduction of wastes. As a result, the total cost of production at all supply chain will definitely remain harmonized and kept at relatively at the lowest state (Cheng; et al, 2010). Cheng; et al, (2010), illustrates that other than the availability of resources across the border countries, multinational companies are also attracted by cheap labor forces, high market demand and affordable distribution cost. For such reasons, organizational supply chain will often enjoy conveniences with increased amount of production while experiencing a higher rate of productivity with effective minimal production costs. Consequently relevant to all supply chains as in contrast to local based firms who are susceptible to high production cost due to inadequate resources in poor redistribution of production risks. Supply chain helps in meeting of the global demands Better knowledge about a market operation based on regulation polices and operational talent processes are some of the biggest issues when it comes to supply chain. It may be challenging in determining the levels demand based on the international countries using the supply chain logistics and the relevant materials (Hoover; W et al, 2001). As a matter of global demand, issues such as management, planning and forecasting should be considered. The point to note is that, organizations within a relevant supply chain are always affected by specific demands. The rest of the other organization is affected by both interdependent independent demands. This gives a clear illustration that the way to deal with the demands across international borders must therefore, be difference between independent and interdependencies are intrinsic ideas of demand. The developing techniques, demands and skills necessary for a particular organization, usually results into consequent impact to the global customer demand and the amount necessary to sustain the customer levels. This is also an articulate result to the role of sales in accordance to the demand management (Hoover; W et al, 2001). Supply chain enhances additional skills Despite the fact that, of the supply management team comes from different discipline bodies, possible positive appointment to the managerial position requires that their skills and effectiveness shall have been discussed in relevance to organization efficiency and effective performance. The appointment of managerial leaders to the organizational supply chain is based on consideration of skills, knowledge and any other additional skills, which is otherwise considered as global comparative advantage (Radhakrishnan, 2001). According to Radhakrishnan, (2001), positive transitional change in management levels in a supply chain is considered to be one of the intrinsic attempts to the improvement of skills that are easily acquired through integration of the organization culture together worth the other enterprises that the organization relates to at different state levels. Consequently, such consideration translates to competitive advantage of the organizations. Besides, any increment in wages is also considered as an additional advantage with respect to this because the charges are now translated as part debts to the governments. Helps improve organizational time management In business, competitive advantage is achieved when an organization is able to make several units of production within a shorter time frame. Besides, time management is also vital when it comes concerning the delivery of products to the markets especially during the period when high demands are expected. A lot of advantages are accrued with proper time utilization and careful analysis of all the production, distribution and marketing and sale process. With respect to this, appropriate consideration is there after done to do away with unnecessary tasks that are perceived to reward very minimal returns to the organization especially to the production processes (Boyson et al, 2004). Multinational supply chains allows for time for proper time utilization to the advantage of increased premium in different countries leading to high returns with product dominancy such as perception of higher product value. An organization is capable of achieving numerous economies of scale with the highest competitive advantage especially during market promotions and organizational popularization with definite agendas of being unique in the market as a way of sustaining global competitive advantage (Boyson et al, 2004). Creates room for innovation through lengthy network of collaboration In consideration to global marketing or any other form of marketing, the mutual principle is that products that are considered to have reduced lifecycles will often subject organizations to look for other alternative of developing new products. Additionally, shorter products lifecycles impacts a number of considerable stresses to most of multinational supply chains especially over the issues of budgeting. Coming up with new product is therefore an expensive a fair to the organization but through proper collaboration with an aid of multinational supply chains, most of the organization will definitely get to amicable issues, which are meant to reduce unnecessary cost while adding relevant values to the partners involved (Myers,2010). In order to avoid unprecedented waste that are brought in by teaming a way from working margins, it is necessary to consider innovative ways and of embracing collaboration with other likeminded partners for mutual benefits because successful multinational supply chains relationships both to the buyers and seller for the benefits of achieving highest competitive advantage (Myers,2010). Conclusion The perception of being able to achieve reputable returns besides competitive advantage is the main principle to be used as a determinant of a successful business. According to Huang, (2009), in every aspect involving more than one company trying to seek dominance in a specified market, the potentiality of being able to sell more products is at the best interest to the achievement of competitive advantage, which is more predominant when it comes to multinational supply chains. References: Bodegraven, V & Ackerman, K. (2007). 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Commercial Operations Management: Process and Technology to Support Commercial Activities. New Delhi: Global India Publications. Read More