Global Supply Chain Management - Assignment Example

Global Supply Chain Management Introduction Supply chain management can be considered as a widened management focus that addresses the combined effects of all companies involved in the production of commodities, from supplies all the way to retailers to the final consumers and afterwards when they are disposed and recycled (Hieber and Schönsleben, 2002, p. 110). This approach to the management of production and logistics networks assumes that all the companies that take part in the process of deliver of commodities to the consumers are components of a network of supply chain. It includes all the aspects needed to satisfy customers while encompassing the determination of products they will purchase, the manner in which they are produced and how they are delivered. A supply chain philosophy makes sure that customers receive the correct products at the right time and at a suitable price at the preferred location (Remenyi and Martín Sánchez, 2007, p. 9). Increase in competition, intricacy as well as geographical scope in the business world have resulted in a broadened scope and advancing improvements in the abilities of the personal computers towards optimization of supply chain performance. E-mail as well as the internet has been revolutionary in regards to communication and the exchange of data that has facilitated the essential flow of information between the companies that are part of the supply chain (Sadler, 2007, p. 209). The firms that practice supply chain management experience considerable reductions in cost and cycle time (Li and Du, 2005, p. 279). For instance, Wal-Mart stores reported an increase in inventory turns, decline in out-of-stock occurrences along with a renewal cycle that has decreased from weeks to only hours as a consequence of an effective supply chain management. Even though supply chain management is simple to understand in theory, it develops more complexity with bigger companies and it variety of products, more global locations of the suppliers, customers as well as facilities responsible for distribution. Supply chain management is also complicated since companies may be components of more than one pipeline at a specific time (Fredendall and Hill, 2001, p. 4). As an example, the manufacturer of synthetic rubber may simultaneously be a part of the supply chain for tires, industrial products, mechanical parts, shoes and aircraft components among others. Key drivers of supply chain performance in a complex environment Lambert (2008, p. 20) found out that the performance of a supply chain is dependent of a number of drivers: logistical and functional including facilities, inventory, transport and information. Facilities Facilities define the physical locations where commodities are produced or stored, where storage and production sites make up the main forms of facilities (Zanjirani Farahani, Rezapour and Kardar, 2012, p. 193). In the facilities, there is either processing or transformation of inventory into a different state or storage before the commodities can be shipped to the next phase. The centralization of facilities is reliant on economies of scale in order to increase the efficiency of the supply chain as the facilities and their capacities to function effectively are a core driver of supply chain performance in regards to sensitivity and productivity. Companies are able to achieve economies of scale when products are manufactured or warehoused in a single location, as this centralization improves efficiency. However, the resultant reduction in costs affects responsiveness since numerous customers may reside at a reasonable distance away from the production facilities with the opposite also being true. Facilities that are located near the customers increases the number of required facilities while at the same time reducing the efficiency of the supply chain (Hübner, 2007, p. 20). In the event that the customers demand and are willing to pay for responsiveness associated with having multiple facilities, then having more facilities assists the company to meet its competitive strategy objectives. Inventory Inventory entails raw materials, the unfinished products as well as finished commodities and changing policies that affect these aspects may have a large impact on the responsiveness and efficiency of the supply chain (Fredendall and Hill, 2001, p. 186). Often, the basic decisions that are made by the business in regards to inventory include those that touch on safety, seasonal inventory decisions and cycle. Inventory is part of the supply chain as a consequence of a mismatch between demand and supply. A critical role of inventory in the supply chain is increasing the level of demand that may be satisfied through ready and available products when needed by the customer. Another important role is reducing costs through the exploitation of any economies of scale, which may exist while processing or distributing the product. Inventory exits in the entire supply chain and is a key source of cost in a supply chain while greatly affecting responsiveness (Lambert, 2008, p. 287). The quantity and location of the inventory is able to move the supply chain from poor responsiveness to adequate responsiveness and vice versa. This aspect of the supply chain also has a considerable effect on the flow of materials as well as throughput in the supply chain (Harrison, Lee and Neale, 2005, p. 32). In the event that the competitive strategy of a business needs a high degree of responsiveness, the company can employ inventory in order to achieve this through ensuring large amounts of inventory is located close to the customer. On the other hand, a company can also utilize inventory to ensure it is efficient through reduction of inventory by using centralized stocking. The trade-off embedded in the inventory driver exists between the responsiveness resulting from increased inventory and the efficiency that originates from fewer inventories. Transportation Transportation entails the routes and means used to move inventory in the entire supply chain with faster transport resulting in increased responsiveness but less efficiency in the supply chain while generally supporting the competitive strategy of a company (Li, 2007, p. 273). Transportation is done through water, rail, road as well as pipelines among others means, where electronic transport is considered as the quickest and most efficient means. Regardless of the means used, faster transportation enables the supply chain to be more responsive while greatly reducing efficiency and affecting inventory and the location of facilities. Decisions that affect transportation cover aspects like modes, routes and outsourcing or the use of in-house transportation (Shah, 2009, p. 104). The part played by transportation in the competitive strategy of a company becomes evident when the company seeks to target the needs of its customers. In his work, Sehgal (2009) states that if the competitive strategy of a company targets the customers that demand a high degree of responsiveness, and the customer does not mind paying for the responsiveness, then a company may employ transportation as a means of ensuring the supply chain becomes responsive. On the other hand, if the competitive strategy seeks the customers with the main decision criterion being price, then a company can employ transportation to decrease the price of the product but this will affect responsiveness. Information In most cases, information goes unnoticed as a key driver of supply chains since it is not tangible, nonetheless, it greatly affects every aspect of the supply chain. Based on the arguments of Schoenfeldt (2008), its effects are easy to misjudge since information influences the supply chain in numerous different ways. Information links several partners in the supply chain while facilitating coordination of events since it is a significant of every phase. Information systems have the capacity to enable a company to ensure a high variety of customized commodities reach the customers quickly and to appreciate the evolving tastes and preferences of the customers. Information is a supply chain driver whose significance has increased since companies employ it to increase their responsiveness and efficiency (Mangan, Lalwani and Butcher, 2008, p. 151). The remarkable increase in the importance of information technology is a demonstration of the consequences of information on company enhancements. Similar to the rest of the drivers, even with information, the companies get to a point where the must address a trade-off between responsiveness and efficiency. Barriers to implementation on new supply chain strategies An appropriately designed and working supply chain is different from numerous consumer commodities and is not easy to duplicate. In it, there are certain degrees of trust, productivity and organization that arise from continual improvements since organizational strategy addresses the future sources of supply, demand and competitive advantage in regards to competition. These strategies originate from marketplace, time and sustained long-time advantages with the strategy ensuring a supply chain that is able to deliver in all the aspects of the organizational strategy while at the same time reducing waste in areas that do not contribute to the overall strategy. Aligning the supply chain strategy to the management is a typical challenge with the organizations that are able to achieve this alignment being considered the most competitive as far as the market is concerned. Implementation of supply chain strategies may be may result in benefits or challenges for the business and thus determining challenges in the implementation of supply chain strategies before meeting them is important to the success of supply chain management. Some of the barriers to successful implementation of supply chain strategies include: Lack of implementation of IT Typically, IT systems support concerted processes of the supply chain while at the same time improve the performance of the supply chain. Efficient information and technology systems are extremely significant to the support of global supply chain management in the various phases of a product’s life cycle. It has the capacity to be useful to product development programs that encompass the design for the environment, recovering and reusing (Graham, 2005, p. 375). Horch (2009) notes that effective information systems are required in order to track and trace product returns and connections with the previous sales while information support is a necessity for the development of bonds towards the achievement of efficient global supply chain management in various industries. It is needed to deal with the flow of information associated with forward and backward flow of materials as well as other resources that are needed to ensure that a supply chain is managed efficiently. Resistance to the adoption of advancements in technology Hunter and Tan (2010) view technology as a form of knowledge and a firm with rich experiences in applying and adopting related technologies will have an increased ability as far as technical innovations are concerned. Companies can achieve higher innovative capabilities when knowledge is shared in a simpler manner within the organization and advancements in technology may be realized with increased transferability. Higher explicitness makes it easier for technological knowledge to be shared while technology and innovation integrate the innovation into corporate culture encouraging the employees of the firm to come up with new processes, ideas and solutions. When there is resistance to the adoption of technology advancements in the company, this implies a resistance to change (Wang, 2014, p. 51). Organizational barriers define the difficulties associated with the implementation of fundamental changes in the company. This is the case when there are changes in the main aspects of companies such as the objectives of the organization, type of authority, main technology, market strategy as well as operational strategy. This means that resistance to the adoption of advancements in technology is a significant barrier to the implementation of global supply chain strategies in various industries. Lack of commitment from the top management Commitment and support from top management is essential to the achievement of success strategic programs. Arlbjørn (2010, p. 307) advices that the support of top management is particularly useful for various practices including environmental practices as the top management has a considerable ability to influence implement and support the formation of policies in the entire organization. Other scholars agree that top management is essential to providing continued support for the creation of supply chain strategies and action plans for their successful implementation. It can therefore be concluded that lack of commitment from the top management is among the barriers of implementation of new strategies in the supply chain. Reluctance of suppliers towards new supply chain strategies Strengthening the connections with suppliers leads to lower inventory levels and costs as well as better accuracy. Involving the suppliers in designing the processes and technologies of the new supply chain strategy has an effect on the overall performance of the entire chain (Russ, 2010, p. 366). The reluctance of suppliers to change towards new strategies in the supply chain can be attributed to conventional perspectives and the interest of the suppliers differing from the others in the entire network. The relationship between suppliers and manufacturers is seen as the most significant for development of competitive advantage on the part of the manufacturer. The big industries usually have more than two thousand suppliers and thus the manufacturers are not able to produce products efficiently if they do not collaborate with the suppliers (Cox, Harris and Parker, 1999, p. 171). Suppliers are supposed to meet the desires of the customers in order to maintain business relationships. This implies that the reluctance of suppliers to change towards the new supply chain strategies is a significant barrier to their implementation. Customer unawareness A core barrier in the implementation of new strategies in supply chains is the lack of awareness by the customers concerning the advantages associated with the new supply chain strategies. The demands of the customers develop into the most critical form of external pressure since the awareness of the customer implies that if the customer wants a specific product, the company should be able to make changes to its technology and organization in order to create innovative products (Hugos, 2011, p. 171). However, in most of the industries, a lack of awareness by the customers in regards to the benefits of new strategies in the supply chain lead to producers creating products that the customers do not prefer. In the US, almost three quarters of the consumers state that the purchase is as a consequence of reputation while eighty percent are willing to part with more money for products that are friendly to the environment. Potential unexpected disruptions to complex supply chains and resilience needed to overcome them The management of supply chains needs a delicate degree of balance particularly in the current unpredictable times, as there is increased pressure to maintain the cost efficiency of the supply chain while needing flexibility and resilience in regards to unanticipated occurrences. Through time, supply chain management has become more and more sophisticated with better financial performance in the end. Various measures including sole-source suppliers, just-in-time manufacturing, centralized inventories and common parts are some of the measures that have assisted leaders to run supply chains in a more efficient manner while protecting them against risks such as changes in demand and supply, or quality (Shu et al., 2014, p. 9). However, sine supply chains have become more complicated, there is increased potential for serious disruption as a result of magnified consequences. War, natural disasters and terrorist attacks among other aspects are difficult to predict and can therefore significantly affect a company. For instance, the Tsunami that occurred in Japan in 2011 resulted in a humanitarian tragedy while at the same time having detrimental effects on various industries all over the world since various manufacturing plants that were critical to global industries were located in the region that was most affected by the disaster. There is a vicious circle to the goal of reducing the effects of disruptive risks while simultaneously attempting to achieve cost efficiency. Adding capacity in different locations, maintaining numerous suppliers and increasing capacity in different locations are techniques that can certainly assist in aversion of risk. Leaders should create supply chains in a manner that will contain risks and control the degree of complexity in the system while attempting to avoid the consequences of interdependence between products. Creation of a control strategy through segmentation or regionalization of the supply chain might decrease its fragility and enhance financial performance. For instance, Zara, a fashion retailer renowned for its innovative production and design of fashion, develops items in weeks as compared to the industry average of six months while also launching numerous new designs every year as a result of segmentation. However, regardless of the fact that almost fifty percent of its manufacturing is located in Spain, it continues to outsource basic items to low cost suppliers in Asia. Through segmentation of it supply chain; the company has been able to reduce the effect of potential disruption associated with having a single production area (Monczka, 2009, p. 219). In a similar manner, a car manufacturer can segment its supply chain through restriction of the number of common parts in all the car models or identification of more than one supply source for the common components. Regionalization, which is another type of control strategy, has a similar goal of limiting the effect of disruptions. Currently, fuel prices rise and in the process push up the costs of transport, but regionalized supply chains can lead to lower costs of distribution. Leaders should be able to look at their global supply chains from a broader perspective and understand the significance of strategic plans that allow for business continuity in case of a disruption but this also develops resilience into the business. Regardless of what needs to be invested in, whether back-up suppliers or an increase in the inventory, the resultant benefits may not be seen for a long time, but resilience is being created and this is the most important thing. The supply chain should be segmented in order to decrease risk through initiatives like sourcing from multiple low-cost suppliers in the case of high-volume products that have a low demand uncertainty. On the other hand, if the company deals with low-volume products that have a high demand uncertainty, segmentation can be done at a smaller scale with a flexible but centralized supply chain that has the ability to adopt to any changes that affect demand. In the event that the company produces both categories of products, it should safeguard itself against the effect of disruptions and develop backups for supply through housing fast moving items in distribution centres and locating the slow moving commodities centrally. Further, companies should review the advantages of local distribution and sourcing especially in regards to competition in the emerging markets (Kersten, 2013, p. 225). Multiple plants, regardless of whether they are in the same country, decrease the effect of disruption while at the same time being cost effective as far as distribution is concerned. Through regionalization and segmentation of the supply chain, companies can be able to deploy their back up supply in a faster and easier manner when disruptions take place. Conclusion The management of supply chains is an evolving process that can equated to the philosophies of business process reengineering or total quality management, as it is a continuous process with no stopping point. Emergent technologies as well as effective supply chain techniques employed by companies today are the basis of future improvements in regards to techniques and technologies. An effective supply chain management has the capacity to provide better payoffs in regards to efficiency and costs in the company. Together with improvements in technology and a wider view of the organization, supply chain management deals with the aspects of complexity and competition through exploitation and enhancement of the chain to provide financial, strategic and competitive advantage to the company. The management of supply chains is an integrated concept and in order to make sure that the supply chain remains competitive, the integrated supply chain network is supposed to be observed continuously and employed in a dynamic global environment. In conclusion, information systems are important to the coordination of activities in the supply chain. Bibliography Arlbjørn, J. 2010, Supply chain management, Academica, Århus. Cox, A., Harris, L. and Parker, D. 1999, Privatisation and supply chain management, Routledge, London. Fredendall, L. and Hill, E. 2001, Basics of supply chain management, St. Lucie Press, Boca Raton, Fla. Graham, G. 2005, Exploring supply chain management in the creative industries, Emerald Group Pub, Bradford, England. Harrison, T., Lee, H. and Neale, J. 2005, The practice of supply chain management, Kluwer Academic Pub, Boston. Hieber, R. and Schönsleben, P. 2002, Supply chain management, vdf, Hochschulverl. an der ETH, Zürich/Singen. 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Zanjirani Farahani, R., Rezapour, S. and Kardar, L. 2012, Supply chain sustainability and raw material management, Information Science Reference, Hershey, PA. Read More