Supply Chain and Operations Management - Assignment Example

Supply Chain and Operations Management Introduction Origin of the Term and Definitions The term "supply chain management" entered the public domain when Keith Oliver, a consultant at Booz Allen Hamilton (now strategy&), used it in an interview for the Financial Times in 1982. The term was slow to take hold. It gained currency in the mid-1990s, when a flurry of articles and books came out on the subject. In the late 1990s it rose to prominence as a management buzzword, and operations managers began to use it in their titles with increasing regularity 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 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. A 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. The integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders (Lambert, 2008) 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. 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. According to the AIMS' Institute of Supply Chain Management, it is a management of a global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. Supply Chain Management (SCM) is the management of the relationship between the supplier's supplier and the customer's customer through the supply chain participants (Distributor/Wholesaler and Retailer) between them, mainly using information flow and logistics activities to gain Competitive advantage and customer satisfaction. A supply chain, as opposed to supply chain management, is 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.[7] In many cases the supply chain includes the collection of goods after consumer use for recycling. SCM 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 becoming more flexible, they reduce their 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 led to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Main functions of Supply Chain Management are as follows: Inventory Management Distribution Management Channel Management Payment Management Financial Management Supplier Management Transportation Management Customer Service Management Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's (1998) 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. 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 (Scott, 1993). 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 (Powell, 1990). 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 (Zhang and Dilts, 2004). 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 (Mintzberg, 1979). 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.[11] 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 (Coase, 1998). Many researchers have recognized supply network structures as a new organisational form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System". In general, such a structure can be defined as "a group of semi-independent organisations, 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" (Akkermans, 2001). 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. Historical developments Six major movements can be observed in the evolution of supply chain management studies: creation, integration, and globalization (Movahedi et al., 2009), specialization phases one and two, and SCM 2.0. Creation era Keith Oliver first coined the term “supply chain management” 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. 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 cost reductions through integration. A supply chain can be classified as a stage 1, 2 or 3 network. In a 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 is ERP enabled. In 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. Globalization era 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 over 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. 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. Specialization era (phase I): outsourced manufacturing and distribution[edit] 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, by extending the supply chain beyond the company walls and distributing management across specialized supply chain partnerships. 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). 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 and risk involved in it. Specialization era (phase II): supply chain management as a service[edit] Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, 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 work flows 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) Building on globalization and specialization, 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 this new "era". The growing popularity of collaborative platforms is highlighted by the rise of TradeCard’s supply chain collaboration platform, which connects multiple buyers and suppliers with financial institutions, enabling them to conduct automated supply-chain finance transactions. 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; surging oil prices; short product life cycles; expanded specialization; near-, far-, and off-shoring; and talent scarcity. SCM 2.0 leverages solutions designed to rapidly deliver results with the agility to quickly manage future change for continuous flexibility, value, and success. This is delivered through competency networks composed of best-of-breed supply chain expertise to understand which elements, both operationally and organizationally, deliver results, as well as through intimate understanding of how to manage these elements to achieve the desired results. The solutions are delivered in a variety of options, such as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high-touch in the traditional software deployment model. Supply chain management is the management of resources and finances in a given channel of distribution. This channel usually consists of suppliers of raw materials, Production Company or manufacture, wholesaler, retailer and finally consumer. This practise is meant to ensure that the goods manufactured flows smoothly from one channel to another. It is important to note that the three important things that flow from the supplier to consumer is product, information and finances. The purpose of this research paper is to critically analyse supply chain of Dell computers and Mercedes-Benz. It will focus on the design of the chain supply system of the two brands, how these manufacturing make decision in chain supply management, the role of consumers in producing and supply of their product and finally the importance of producing quality products. Dell is a computer manufacturing company that began its operations in the year 1984. Its founder Michael Dell was an undergraduate of University of Texas when he saw the need of distributing computer spare parts. His selling strategy was directly focused to consumer. This was meant to enable him understand the need of consumer at a personal level and was therefore able to provide effective solutions in the world of computing. The company grew to the extent that it could build its own computer and it has since grown to the present age Dell Company. On the other hand, Benz is an automobile manufacturer based in Germany. Karl Benz founded this company in the year 1926. Benz earns it reputation of producing the first car whose engine used petrol. The company has really grown and its automobiles have found ways in both the local and international markets. This automobile industry is currently known for manufacturing or luxurious cars like the Phantom Roll Royce, Porsche among others. The overall design of the supply chains In order to understand the supply chain designs employed by Dell and Mercedes-Benz, it is good analyse the principles of supply chain management. One, producing goods and commodities that are in accordance to the needs of a customer. Dell began as a company of selling computer parts to consumers before making its way to selling complete computers. It has achieved this by its direct model of approaching customers. Dell manufactures and configures their computer in accordance to consumer’s specifications. On the other hand, Benz also produces its cars to meet consumer’s needs. According to Dell, Benz standards “seek to achieve sustainable and efficient cooperation with our suppliers in a system marked on mutual expectations and obligations. (Dell, Michael and Catherine, 9)” The organisation of Dell is very effective. There is an analyst who is in the field. These analysts collect data about the market and report it to the chief procurement officer. Another function of these analysts is produce and relay facts and figures that will be used in the process of decision making. Finally, the analyst is supposed to come up with recommendations for the procurement team. Another important factor of chain supply that is important to consider is product differentiation and standardization. Dell makes used to assemble their computers in accordance to customers’ demands and due to this they offered variety of products. This is because, product preference of one customer to another varies greatly and this leads to product differentiation. Benz has achieved product differentiation through making of different car to suite different tasks for instance lorries and personal cars. Another important aspect to consider in design of chain supply is standardisation of product. This is very important if the product has to sell in global markets (Kimes, Beverly and Harris, 6). Dell is now coming out of the practise of designing products in accordance to consumers’ needs and it is embracing the aspect of producing variety of standardised computers for its consumers. Benz on the other hand, make cars that are compatible with most roads of different countries. By supplying such cars, they are able to increase sales. Another important aspect of supply that is exhibited by the two manufactures and distributors is the use of Internet to connect to customers and sell their products. Online marketing also enables them collect market statistics on rate of sales and where market is promising. Stats show that Dell makes more than $4 million everyday through online marketing. Furthermore, Benz has capitalised on Instagram, this strategy was developed in order to reach young people. Young people love luxury and Benz is a luxurious car, therefore its market is promising as far as young people are concerned. How decisions are made Before analysing how decisions are made in an organisation it is good to recognize the management and leadership of Dell. The company began on a humble background and sharply grew. This meant that there was need to employ more managerial staff. Leadership style of Dell is participatory; this means that everyone has the ability to air their views. When Michael Dell began the company however, he was autocratic and he would make his own decisions and pass them to the team. However, as time progressed, he became participative. One great lesson from Michael Dell is that decisions are not made based on emotions but rather decisions should be based on facts and figure collected, analysed and proved. Benz uses follows several methods to make decisions. They employ the 80/20 principle. This principle asserts that one should make 80% of output from 20% of input. The main resource produced in German is steel and therefore they have to get other material from outside countries. Benz is a car whose demand is rising rapidly (Williams, 11). This means that for Benz to be on the cutting edge it has to make fast decisions. The decision making process is heavily dependent of practicability and not based on theoretical and bureaucratic procedures. Moreover, Benz believe in making durable and luxurious cars that are in accordance to consumers standards. Therefore, their decision making process is deeply rooted in what they believe rather than the surrounding facts. Benz also makes its decision through discussions. Role of customer In any business setup, customer are key in the success of the business. Dell through its direct contact model with consumer, it has made gigantic step in its product innovation and design. The company keeps contact with its customer whether physical or through online communications. Most customers prefer products that are customised in accordance to their preferences. As a result, Dell has been able to incorporate the so many ideas of clients into their production and this has enable them come up with wide range of products, ranging from desktops, laptops and notebooks. In addition to that, customer have enabled Dell cut down on operation cost (Hymes, 3). The direct model and the constant feedback they get from customers has reduced the presence of middlemen and this has also enabled Dell sell its products at affordable prices. In the automobile industry, consumer act as tools for identifying differences in brands of cars. In addition to that, consumer has enable a company like Benz, which produce luxurious cars, standardize the price of their cars. Through consumer interaction, Benz has been able to establish communication channels in Africa, especially countries like Kenya and Tanzania. In addition to that, Benz has been able to establish outlets in these countries from which it sells spare parts and other accessories related to their motor vehicles. Benz sell its car in different countries that have different policies pertaining to environment. Due to this, Benz has had to make its cars environmental friendly (Kotler, Philip and Gary 23). In countries like Japan, consumers always insist on goods and products that are reliable and quality. As a result, manufactures of vehicles, like Benz have to produce high quality and durable cars so as to sell in these markets. In doing so, manufacturing product to meet quality standards of domestic consumers, they end up making good quality cars that can also compete for international markets. Cars like Peugeot and Renault have are not competing well in the market, this is because they have poor designs and their manufactures never designed them focussing on meeting customer’s demands. In Germany, where Benz is made, most people are engineers. In addition to that, roads Germany are smooth and there are no policies governing maximum speed in which one can drive. As a result, the Germans define the materials use to make Benz. As a result, comparison of Benz, in terms of its architecture and engineering, outshines other vehicles in the international market. The importance of quality Computer world is undergoing rapid and instantaneous changes (Bankston, 4). With emergence of super quality computer manufactures like Apple and Samsung, Dell has been found to lag behind in production of quality computers. When consumers what to get more information about something, the easiest and best place is from a website. However, Dell’s website showcase outdated products, that is, desktops and laptops. According to computer market standards, these products have lost value. Counterparts like Apple is inventing tablets and so forth. Another quality problem with Dell is that they are still holding on to their old fashioned ideas of assembling different materials to make a computer and are focused less on producing ready made products (Lyles, 13). As a result, they products are inferior in quality as compared to others. History indicates that Dell has ventured into the world of manufacturing other products like iPod, mobile phones, tablets but it has failed. This is because of inferior quality products. Dell has also been found guilty of selling faulty computer to consumers and then blame consumers. It was alleged that, they had built motherboards of their machines using faulty capacitors imported from Japan. These product when they were sold in the market exhibited alarming irregularity. As a result, Dell is slowly loosing market and if it is not careful it will be like Nokia which was once a giant in mobile phone industry but it is currently nowhere to be seen. German has a good reputation of its engineering architecture in automobile industry. However, in the beginning of early 90’s, Benz M-class SUV was poor in quality. Statistics have shown that since 2007, Benz quality has been steadily declining (Dell, 50). Benz has is reputable for its luxurious nature, however this makes manufactures of Benz make complex audio systems too complicated for consumers. Despite the fact that the quality of Benz has declined, its cars are good as compared to cars like Toyota and Nissan from china. In addition to that, the comfort and luxury they offer makes consumers crave for them. Germany is known for steel production therefore cars from Germany, especially Benz is very reliable and strong and cannot compared to cars from other countries which are made of alloy. Conclusion Supply chain management deals with analysing how information, products and finances flow from the supplier of producer to consumer. An organisation that follows this channel clearly wins the market. When Dell came into the industry, it really tried. However, with entry of rivals like Apple, the quality level of Dell has gone down. Benz on the other hand is striving to maintain as image. By producing luxurious car meeting the needs of domestic consumer, it has been able to manufacture cars that are acceptable global wise. Finally, for any business to prosper, correct decisions must be made by the management. References Dell, Michael and Catherine F. (2009). Direct from Dell: strategies that revolutionized an industry. HapperBusiness. Kimes, Beverly, R. and Harris L. (2006). The star and the laurel: the centennial history of Deimler, Mercedes and Benz 1886-1986.. Mercedes-Benz of North America. Williams B. (2001). Karl Benz. New York: Bookwright. Kotler, Philip, and Gary A. (2012). Chilton European service manual: Audi, BMW, Mercedez-Benz MINI, Saab, Volkswagen, Volvo. New York: Cengage Learning. Bankston J. (2011). Karl Benz and the single cylinder engine. New York: Mitchel lane publishers. Lyles, W. H.. (2003). Putting Dell on the map: A history of the Dell paperbacks. New York: Greenwood press. Dell A. (2011). A comprehensive history of Dell. Abhishek Publications. Hymes D. H.. (2013). Study in the early history of Dell: success and failures. Indiana University Press. Read More