Strengths and Weaknesses of Mainstream Supply Chains - Essay Example

Strengths and Weaknesses of Mainstream Supply Chains al Affiliation Global Supply Chain Management The mainstream Supply chain management faces some challenges although it fetches numerous benefits to organizations, especially in the global context. Supply chain management (SCM) aims at value addition to products and services through effective monitoring, design, control, execution, and planning mechanisms (“Global Shift: Changing Geography of the Global Economy” pp. 14-28). Companies have to manage the logistics related to the inflow of labour and raw materials even as they monitor the distribution of their final products and services. Many entities are involves in supply chains, which make it hard to manage. Global supply chains present enormous challenges for companies in terms of management, although the benefits are equally massive (Henderson, Dicken, Hess, Coe, & Yeung 2002, pp. 436–464). This paper assesses the weaknesses and strengths of mainstream supply chain management using Supply Chain Management, Global Production Network, and Global Commodity Chain, which are the fundamental assessment frameworks to Global Supply Chains. Supply chain management is an essential component of the management tools of organizations dealing in the flow of goods and services. Value creation is important for organizations because the main objective for existence of companies is to make profits. It means that companies must design a competitive infrastructure through which all its supplies and products/services will flow. The ease of flow of which products/services from the manufacturers to the final consumer is tantamount to the efficiency, and largely the profitability, of such manufacturers (Allen & Thomas 2001, pp. 243-247). Conversely, the manufacturers or service providers must design an efficient infrastructure through which raw materials flow from the supplies. Besides the suppliers and the final consumers of products and services, supply chains involve many other entities, who either create value or facilitate the movement of products and services across the supply chain. Accordingly, organizations employ supply chain management as a means of ensuring smooth flow of raw materials from the suppliers and efficiency in delivery of products/services to the end customers (Dicken 2011, pp. 14-33). The logistics of supply chain management increase tremendously when it comes to international businesses. The global context of the supply chain involves many middle parties from across the globe. As a result, Global Production Networks (GPN) becomes inevitable, particularly for multinationals with subsidiaries in far-flung countries where the supplies do not have a base. The organizations coordinate their operations and functions through a nexus of transactions between various goods and services. Global Production Networks (GPN) helps companies to fulfil their promise to their respective customers by delivering products and services efficiently and effectively. Some entities within the Global Production Networks (GPN) are involved specifically with value addition while others play active roles in product transformation (“Logistics, the Supply Chain and Competitive Strategy” pp. 2-11). Global supply chain management has a long history since it began about the time globalization began to gain traction. As companies grew, managers were tasked with the responsibility of designing appropriate supply chains in terms of labour and raw materials. Supply chain management went global because organizations were forced to outsource their materials and labour from across the globe besides appealing to a global clientele. The trends in the mainstream supply chain management keep on evolving with the rapid technological advancements. For example, the 20th century supply chain was largely characterized by fax and mails as the most effective communication systems. In the present world, organization can use Global Positioning System (GPS) to locate control, and monitor all the activities within their supply chain. Besides, companies also use RFID scans to track the delivery of goods and services along their supply chain. Global supply chain management is significant to organizations because it defines their global positioning (Henderson, Dicken, Hess, Coe, & Yeung 2002, pp. 436–464). Significance and Strengths of Mainstream Supply Chain Management Global supply chain management is important because it aids in the management and regulation of the global market forces. It fosters the demand for foreign products, services, logistics, and labour, which are important for international trade. Indeed, global supply chain management creates a nexus of the global commodity chain in the sense that companies create an interrelationship with all the players within the supply chain in the global market. Consequently, both foreign and local firms can compete fairly within a given market environment. Besides, the global presence created by a global supply chain can act as a defensive tool for companies that face stiff competition in some markets across the globe. Such companies can use their global presence to compete effectively in some local markets. Besides, global supply chain ensures that companies keep abreast with technology in order to design and produce top-notch products/services (Henderson, Dicken, Hess, Coe, & Yeung 2002, pp. 436–464). When it comes to the political and economic factors, global supply chain management is instrumental to multinationals because it offers special tools for trade protection. Such policies as tariffs, quotas, environmental regulations, voluntary export restrictions, and government procurement policies are easy to negotiate when a firm has a global supply chain management. Through global supply chain management, the firm can coordinate and streamline its global production network according to the prevailing market restrictions. The political and economic factors may affect the flexibility within which companies operate in their Global Production Networks and a global supply chain cushions them from drastic fluctuations in exchange rates (Allen & Thomas 2001, pp. 243-247). Perhaps one of the most important reasons why companies need global supply chain management is to cushion themselves against global cost factors, which can be unfavourable in some regions. Some regions around the world can offer multinationals such as The Coca-Cola Company with significantly cheap skilled and semi-skilled labour (Cox 1999, pp. 167-175). Additionally, price breaks and tax breaks are capital-intensive services that global supply chain can help a company meet efficiently and effectively. The cost factor is a huge burden in international operations, especially when a company operates independently. However, global supply chain management offers an opportunity for companies to manage their global commodity chains in an efficiency and effective manner (“Global Shift: Changing Geography of the Global Economy” pp. 14-28) The mainstream supply chain management has the potential of augmenting the sales and profits of companies. Supply chain management reduces the operating costs by reducing the dependence of businesses on the Global Production Networks. Companies that run supply chain management can open new markets with ease by spotting opportunities within the market. Such a management system enables companies to notice areas that need improvement within the supply chain and act accordingly (Dicken 2011, pp. 14-33). The financial strengths of the mainstream supply chain management escalate when the supply chain is global. Companies with elaborate supply chains gain through cost cutting because the ‘middlemen’ and the parties involved in adding value to products/services incur some of the cost. Consequently, companies can operate a lean supply chain through supply chain management, which reflects on the overall profitability of the companies (Henderson, Dicken, Hess, Coe, & Yeung 2002, pp. 436–464). Through Global Production Networks (GPNs), Multinationals can manage their supply chains globally. The GPNs enable companies to coordinate their operations from the supply of raw materials to the delivery of the final product to the customer. Such companies can diversify their trading on a global platform by incorporating value addition to their manufacturing process. Diversification through supply chain management gives companies a competitive edge over their rivals. Hence, companies that manage their portfolio through supply chain management systems can benefit a lot compared to companies that have scantly supply chain management system. It is so because the consumers are the central components of any supply chain. If the management of such supply chains is efficient, then the customers will be happy with the products and services that they receive. This in turn strengthens the revenue and capital base of the company. Besides, companies that manage their supply chains efficiently and effectively often have credibility and reputation. (“Global Shift: Changing Geography of the Global Economy” pp. 14-28). Weaknesses of the Mainstream Supply Chain Management Besides the numerous strengths of the mainstream supply chain management, it is worth noting that supply chain management has its weaknesses that most companies contend with, especially the multinationals. As the supply chain gets bigger because of globalization, companies have to invest heavily in the resources needed to manage such an expanded supply chain (Allen & Thomas 2001, pp. 243-247). Global supply chains require enormous investments in terms of time and money. In most cases, supply chains comprise of complicated chains and global production networks for global supply chains. The logistics required to manage such supply chains are intense. Companies have to liaise with a number of organizations and separate entities in order to ensure smooth flow of products and services. The situation is even more intense in global supply chains where companies monitor and regulate global commodity chains (“Logistics, the Supply Chain and Competitive Strategy” pp. 2-11). More often than not, companies derive negligible benefits from global supply chains because of the huge number of suppliers and distributors involved. Since supply chain management involves the management of raw materials from the suppliers to the manufacturer, the manufacturer may not have the luxury of choice if the suppliers are few. In that case, the company has no control over the activities of the suppliers. Conversely, it is difficult for one company to manage the long chain of distribution of services and goods across a vast market environment. Supply chain management puts the company’s reputation at the mercy of all the suppliers and distributors (“Global Shift: Changing Geography of the Global Economy” pp. 14-28). The emergence of e-commerce and mobile-enabled trade as well as its popularity with 21st century customers implies that the chain must expand its stock keeping units. A greater percentage of the players are either embarking on building new distribution centres or are creating direct-to-customer capabilities. The challenge with this move is that if small and midsize industrial manufacturers and distributors fail to take e-commerce seriously, they may end up becoming the next Borders. To achieve, the supply chain system needs to build multi-channel fulfilment networks capable of simultaneously processing multiple ordering and fulfil them to maximum customer satisfaction at lowest costs possible (Lee et al. 11). Inattention to potential risks is another challenge facing the supply chain system. Globalization has immensely increased risk susceptibility of the supply chain system and its inability to adequately define risks and develop mitigation strategies for high probability ones could jeopardize business sustainability in the short- and long-term. With manufacturing operations taking place on a global platform, it is imperative for businesses to have a global procurement network capable of supporting and effectively reacting to the needs of the supply chain system. Supply chain management has strengths and weaknesses that organizations can manage differently, depending on the level of operation and the prevailing market conditions. Supply chain management involves a complicated process whereby companies have to manage the inflow of raw materials and services such as labour before remitting the products and services down the distribution lines (Dicken 2011, pp. 14-33). Globalization has necessitated companies to embrace global supply chain management, whose logistics are even more complicated. Companies such as multinationals have to grapple with global production networks to facilitate the smooth flow of products and services down the global commodity chain. Overall, the importance of supply chain management to companies cannot be overstated (Henderson, Dicken, Hess, Coe, & Yeung 2002, pp. 436–464). Reference List Allen, T, & Thomas, A 2001, Poverty and development into the 21st century, Oxford Univ. Press, Oxford. Cox, A 1999, ‘Power, value and supply chain management: Supply Chain Management,’ An International Journal, vol. 4, no. 4 pp. 167-175. Gereffi, G, & Fernandez-Stark, K 2011, Global Value Chain Analysis: A Primer Dicken, P 2011, Global shift mapping the changing contours of the world economy, Guilford, New York. Henderson, J, Dicken, P, Hess, M, Coe, N, & Yeung, H W 2002, ‘Global Production Networks and the analysis of economic development’, Review of International Political Economy, vol. 9, no. 3, pp. 436–464. Logistics, the Supply Chain and Competitive Strategy Lee, H., O’Marah, K., John, G. & Blake, B. (2013). The chief supply chain officer report 2013. SCM World. Retrieved from http://downloads.deusm.com/ebnonline/The-Chief-Supply-Chain-Officer-Report-2013-2.pdf Read More