Coordination in Supply Chain Management - Term Paper Example

Coordination in Supply Chain Management For any kind of business to strengthen and to grow, there are some key aspects which the management should take keen interest in. Out of those few aspects, Coordination and Information sharing is an integral part of it. There is a significant influence of Supply chain information flow on the material flow behavior and in order to improve the performance of the supply chain, it is recommended that an efficient practice of sharing of information takes place throughout. Supply chain management is the system of businesses that are interconnected with each other, working together towards the provision of a final product that may be goods or services. Supply chain management takes part in the movement and displacement of the goods and services from their production point towards the delivery to the final consumer. Since the supply chain involves a many people from the point of its origin to the point of the consumption, therefore there is an immense need for good coordination and information sharing for the process to be purposeful and be carried out with ease and comfort. Coordination Coordination is also an integral and important part of the supply chain management process. Coordination from the initial stage of the production towards the final stage of shipment is necessary among all the stages of the Supply Chain Management. Importance of Coordination It will be fair to say that Supply chain management is merely based on coordination. Supply chain management can be said to be "A mechanism of coordination and planning among the production to procurement through distribution." (Arunachalam, 2003) Due to the increase in demand of high performance, coordination has become the life blood of Supply Chain Management. That is why there is a need for the organizations to select an appropriate mechanism for the coordination process to take place in the correct order. Supply Chain Coordination Mechanism There can be four different attributes on which a Coordination Mechanism can be based on. These attributes are Structure of Resource sharing, Style of decision making, control level and sharing of risk/rewards. (Beamon, 2006) Each of which is explained briefly below: Structure of Resource Sharing: Resource sharing is an important attribute of coordination and the communication process. Resource sharing in the process of coordination can be at all levels. This can be the Resource sharing at Operational level, planning level and the Strategic level. The resource sharing in the operational level can be regarded as the communication process carried out during the collection of operational resources, point-of-sale data etc. The planning level coordination can be the one carried out among the managers while developing plans for production and inventory development. Resource sharing at the strategic level can be during the formulation of the strategic plans, resource investment in the sector of Research and Development and forming strategic alliances. Decision Style: There can be two major styles for the decision making. The two styles can be centralized and decentralized styles. For a centralized style of decision making, a single firm has the control over the decisions to be taken during the Supply Chain Coordination Process while in a decentralized style; all the firms have to take their decisions independently and to enforce them. Level of Control: When it comes to the level of control, there can be a High level of control and a Low level of control. The high level of control is one where there is a strict and accurate level of control and monitoring; the firms outline and develop strict routine and rules to be followed along with control systems which can observe other firms' performance. In contrast, the low level of control has a very slight monitoring and control over the activities. Risk/Reward Sharing: The risk/reward sharing determines the distinctiveness of the motivation and incentive plans. There can be two types of the risk/reward sharing methods; this can be fair and unfair. A condition where fair rewards exists is where a certain firm is willing to undertake more risks that the other firms are and as a result receives more advantage from the coordination. The unfair condition is the vice versa of this as the firm takes a low risk and manages to enjoy more benefits from the coordination. Information Sharing Information sharing in supply chain management is very necessary due to the integration of processes throughout the supply chain in order to share information regarding forecasts, transportation, demand signals and prospective collaboration etc which are an integral part of the supply chain process. Importance of Information Sharing: There is enormous importance of information sharing and it is regarded as one of the main drivers towards improvement and optimization of the overall performance of the supply chain management. (Chen, 2003) In order to foster the overall process of supply chain, there is need that the flow of information from the initial stage towards the final stage is carried out in the appropriate manner and supply of information is genuine and constant throughout the process. Stages of Information Sharing: There are numerous models which have been recommended for the information sharing practices to be carried out in an effective and successful manner. It is of great importance that in a supply chain management, information sharing is carried out at all stages starting from the order stage to the supply stage. Order Information Sharing: This is the first model of information sharing. As it is well understood that the forecast of the demand at all the stages of the information system are based on the local demand function this can be regarded as the stage of immediate downstream. (K.C. So, 2000) Since the demand is very uncertain at all stages, it is necessary that a periodical review policy is applied so that the information can be shared among all stages for an effective process to be carried out. Demand Information Sharing: This stage of Information sharing is based on the information supplied by the first stage and the information supplied is real-time. The demand information sharing is related to the demand of the product in the area at which it is being supplied. In case the demand is less and the output is more, the resultant can be the outcome which can distort the whole process of Supply chain management. An echelon policy is adopted during the sharing of the demand information among the stages therefore the bullwhip effect is minimized through the demand information sharing policy. Inventory Information Sharing: This is the stage where each of the stages shares its demand and inventory information with all the other stages. Here, the demand status and the inventory status is reviewed for any variance. (Li) Any variance in the demand and inventory has an impact on the safety and buffer stock which is revised as per the needs to maintain the usual flow. Since the whole process is based on the Inventory flow and any distortion in the information flow at the inventory level can hurt the whole process, therefore it is necessary that the information sharing at this level is purposeful. Shipment Information Sharing: This is another important part of the Information Sharing process as to the quantity of the product to be shipped to the customer as per the order of the customer. This stage is capable of eliminating a stage of distortion which provides a buffer against the uncertainty of the demand. Overall, the information sharing at all the relevant stages is necessary to produce a combine effort at a minimum cost so that every stage contributes their part in it. There are numerous aspects of the process of supply chain management and Information sharing and Coordination is two of them. As supply chain management is a dependant process, it is necessary that all the components integrate and interrelate to provide the best output at a relatively low cost. Therefore, it can be concluded that in the process of supply chain management, information sharing and Coordination hold the importance of life-blood and without proper coordination and information sharing at all the stages of supply chain management; the process cannot be carried out with perfection. Bibliography Arunachalam. (2003). Beamon, B. M. (2006). Supply Chain Coordination and Cooperation Mechanism. The Journal of Supply Chain Management . (2003). Information sharing and supply chain coordination. In F. Chen. Amsterdam. K.C. So, a. C. (2000). The Value of Information sharing in a two-level supply. The role of inventory in delivery-time competition. In L. Li. Read More