Logistics and Supply Chain - Coursework Example

LOGISTICS AND SUPPLY CHAIN MANAGEMENT: INTEGRATED SUPPLY CHAIN MANAGEMENT of the of the Table of Contents Tableof Contents 2 Introduction 3 Integrated Supply Chain 4 Contribution of Supply Chain Logistics towards economic value of US 7 Conclusion 14 References 15 Introduction The supply change management process has undergone many changes over the years with the development of the business management process. In the contemporary scenario, supply chain management has evolved from an operations management technique to an aspect for gaining competitive advantage (Geunes, 2009). The concept of integrated supply chain management (ISCM) came into limelight with the growing tendency among the business houses to reduce their operational costs by enhancing a streamlined supply chain system. This report is focused on evaluating the importance of integrated supply chain management and its benefits to the organization. The financial implications of implementing an integrated supply chain management. The report will focus on the logistics process of implemented by big brands in the real life businesses for highlighting the short and long-term benefits of ISCM. Integrated Supply Chain Germain, Claycomb & Droge (2008) defined ISCM as the process of connecting all the functional segments of a firm for organizing the supply chain management process, activities such as logistics, procurement, etc are streamlined in an integrated supply chain. Stevens (2007) emphasized that an integrated supply chain helps a company to enhance their procurement, manufacturing and logistics process across wider geographical locations. From the above two definitions, two different features of integrated supply chain management can be assessed. Germain, Claycomb & Droge (2008) focused on the internal functions while Stevens (2007) reflected the broader objectives of ISCM. On the other hand, Geunes (2009) argued that implementing an ISCM is implemented in order to reduce the operational costs of the company and also develop a network of partners across the domestic and international market places. Awad & Nassar (2010) provided a more specific explanation of ISCM by stating that ISCM focuses on organizing the inventory cost control process by connecting the procurement, manufacturing and logistics aspects of the supply chain function. US automobile giants Ford is known to have one of the best integrated supply chain concepts in the world. Ford has always focused on reducing their operational costs for enhancing their revenue. The SCM of the company till 1995 was based on Made to Stock concept (IMA, 1999). The SCM process of the company was mainly based on the market demand of their vehicles and this resulted in opening of too many manufacturing centers for the company. Figure 1: Ford Value Chain in 1995 (Source: IMA, 1999, p - 19) Ford integrated their SCM by reducing their vehicle centers and teaming up with their competitors such as General Motors and Chryslers to develop a common platform for SCM. Ford developed an automated system with the help of Penske Logistics called “Network Integrator’ with the aim of reducing the transportation cost and the carbon footprint of the company by 15% by 2015 (Nederland, 2012). However, effective integration across geographical boundaries and setting up of Auto Exchange Centers have helped them to reduce their carbon footprint by 25% and transportation cost by 20% at the end of 2012 (Nederland, 2012). Japanese automobile firm Toyota, also known as the father of modern era supply chain management because of their zero inventory concepts of SCM and streamlined distribution all over the world (Iyer, 2012). Toyota focused on creating variety in their products and at the same time managed the costs of production. The inclusion of consumers in the SCM gave Toyota enhanced and more specific information for integrating their SCM. Contribution of Supply Chain Logistics towards economic value of US Contribution of an ISCM towards the economic value of a company can be better explained with the help of real life examples and their ISCM models. As mentioned above, the ISCM model of Toyota focused on zero inventory management by including their consumers; this allows the company to engage in appropriate resource utilization process (Awad & Nassar, 2010). With the help of appropriate ISCM, a firm can develop the ability to enhance their product and service quality and also reduce the cost of operations. Figure 2: Toyota SCM process (Source: Iyer, 2012) Another expressive example of effective ISCM is Dell. Dell is one of the biggest technological firms in the world, dealing mainly in computers, phones and other technical gadgets. Dell’s network is a direct chain of their operations process and spread all over the international market place (Stevens, 2007). The ISCM technique of Dell is called virtual integration which again focuses on direct communication with the consumers for enhancing SCM efficacy (Geunes 2009). Dell efficiently reduced their transportation costs with the elimination of third party distributor networks and developing organizational retail chain. Also, management of the inbound and outbound logistics of the company was streamlined because of appropriate tracking facilities and uniform database monitoring across all their data stores (Geunes 2009). Overall it can be observed, the economic value derived from appropriate ISCM implementation is both short term and long term. Figure 3: Dell’s Model of Virtual Integration (Source: Iyer, 2012) Germain, Claycomb & Droge (2008) opined that ISCM not only focuses on the organizational perspectives but also creates value for the geographical regions. The intention to reduce the cost of operations creates greater value of the organizations which in turn can be measured by their tax obligations towards the nation. The example of Ford given above reflects huge cost reduction in their transportation process. Now, this can signify many aspects of economic value for US. Firstly, as transportation is reduced the fuel consumption of the country gets affected that contributes towards developing a stable fuel price in the current economic conditions. Also focusing on the global network of distributors and suppliers of Ford, integration in the SCM has allowed the company to gain higher returns for the investment of the stakeholders which can create economic value for US (Tseng Yue & Taylor, 2005). This creates a better platform for the import and export trade facilitation of US. The US automobile industry is ranked 3rd in terms of import and export dealings (Awad and Nassar, 2010). From the environmental perspective, reduction in the green house gases and carbon footprint of the company will enhance the environmental stability of US and create scope for further development of the industrial sectors in the country. Role, advantages and disadvantages of transportation: Transport is one of the three integral aspects of supply chain process, the other two being procurement and manufacturing. Developing an economic and value generating transportation network helps a firm to streamline their service and product delivery process and increase network visibility (Tseng Yue & Taylor, 2005). On the other hand, Germain, Claycomb & Droge (2008) opined that creating a global network depends on the transportation facilities available across geographical boundaries. The cost of acquiring effective transportation means has now become less complex due to growth of technology, however the process of value generation from the logistic operations dominates the decision making process regarding selection of medium of transportation. Generally means of transportation depends on the scope of the distribution channel (Tseng Yue & Taylor, 2005). A company with domestic operations will have different means of transportation in comparison to that of a company which has global distribution channel. Nederland (2012) stated that selection of transportation means is not only based on cost factors rather time taken for delivery, security of the goods in transit also influence the decision making process. The four most means of transportation are by air, road, rail and sea. The below table will compare the advantages and disadvantages between these four transportation modes: Modes of Transportation Advantage Disadvantage By Air Fast delivery time Security of goods High carriage capability Covers large distance Less lead time on suppliers Expensive Growing fuel prices High import and export duty on air carriage Increases carbon footprint of the firm Cancellations and rigid timetables By Sea Perfect for transporting heavy goods Bulk amount of transportation Cheap in comparison to air modes Slow delivery Hard to monitor the progress of shipments Taxes and port duties increase transportation cost By Rail Fast means of delivery Large carrying capacity Cost effective means of transport Reliable means Goods may be harmed during transit Unpredicted delays Thefts during transit Not suitable for cross continent transits By Road Fastest means for domestic transport Flexible timing for transport Emergency transport can be scheduled Unpredicted traffic jams can slow down delivery High fuel charges Not suitable for long distance deliveries (Tseng Yue &Taylor, 2005) Conclusion The above report focuses on the importance of supply chain integration for improving the operational functions and their outcomes of a company. The examples of global brands such as Ford, Toyota and Dell included in this study have revealed suitable systems of integrating the supply chain aspects and their benefits for the organizations. The expansion of ISCM concept in the business sector not only boosts the growth of organizations but also increases the economic stability of a country by stabilizing the national economy. The comparison among the various modes of transportation has reflected the suitability of each transport means for the respective business houses. Integrated supply chain management can be applied through various systems based on the organizational requirements but the firm also should consider the aspect of value addition to the functional segments of business. References Awad, H. A. H & Nassar, M. O. (2010). Supply Chain Integration: Definition and Challenges. Proceedings of the International MultiConference of Engineering and Computer Scientists, 1, 17-19. Germain, R., Claycomb, C. & Droge, C. (2008). Supply chain variability, organizational structure and performance: the moderating effect of demand unpredictability. Journal of operations management, 26, 557-570 Geunes, J. (2009). Applications of supply chain management and E-commerce research. 5th ed. London: McGraw-Hill Education. Iyer, A. (2012) Total Supply Chain Management. Retrieved from http://www.youtube.com/watch?v=IRb4yOKrzs0 IMA. (1999). Implementing Integrated Supply Chain Management for Competitive Advantage., Retrieved from http://www.imanet.org/PDFs/Public/Research/SMA/Implementing%20Integrated%20Supply%20Chain.pdf Nederland, F. (2012). Penske Logistics and Ford Motor Company’s European Supply Chain Case Study. Retrieved from http://www.youtube.com/watch?v=87BKV3SgCGE Stevens, G. C. (2007) “Integrating the Supply Chain” International Journal of Product Development, 19(8). 3-8. Tseng, Y., Yue, W. L. & Taylor, M.A. (2005) “The Role of Transport In Logistics Supply Chain” Proceedings of the Eastern Asia Society for Transportation Studies, 5, 1657-1672. Read More